Marketing Concepts for Bank Exams

8/3/2019 Marketing Concepts for Bank Exams

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Abbreviations that may be asked in Marketing Aptitude:

HNI High Networth Individual.

EOQ Economic Order quality.

FDR Fixed Deposit Receipts.

CNP Cardholder Not Present. PIN Personal Identification Number.

SEO Search Engine Optimization.

CRM Customer Relationship Management.

BPO Business Process Outsourcing.

VAT Value Added Tax.

IDRA Industries Development and Regulation Act.

MR Marginal Revenue.

PAN Permanent Account Number.

BEP Break Even Point.

NPA Non Performing Assets. ATM Automated Teller Machine.

ROA Return on Assets.

M & A Mergers & Acquisitions.

SEBI Securities Exchange Board of India.

GDP Gross Domestic Product.

IPO Initial Public Offering.

What is Viral Marketing?

Marketing by the word of the mouth, having a high pass-rate from person to

person is called Viral marketing. Creating a 'buzz' in the industry is an example

of viral marketing.

What is Bench Marketing?

A comparison of the business processes with competitors and improving

prevailing ones is called bench marketing.What is Drip Marketing?

The method of sending promotional items to clients is called Dripmarketing.

What is Guerilla Marketing?

Unconventional marketing intended to get maximum results from minimal

resources is nothing but Guerilla Marketing.

What is Social Media Marketing?

Social media marketing is marketing using online communities, social networks,blog marketing and more.

What is Direct Marketing?

Direct Marketing is a form of advertising that directly reaches to the customers ona personal basis (like phone calls, private mailings, etc) rather than traditional

channel of advertising (like TV, Newspapers, etc).Types of Direct marketing:


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There are many types of direct marketing, only some important types are listed

below and these are the most form of direct marketing.

i)Direct Mail Marketing: Advertising material sent directly to home and business

addresses. This is the most common form of direct marketing.

ii)Telemarketing: It is the second most common form of direct marketing, in

which marketers contact consumers by phone.ii)Email Marketing: This type of marketing targets customers through their emailaccounts.

What is Indirect Marketing?

Indirect Marketing is the distribution of a particular product through a channel that

includes one or more resellers.

Difference b/w Direct and Indirect Marketing:

Direct marketing is basically advertising your own products or services.In the same way you might advertise for someone else is called Indirect marketing,

is an increasingly popular way of doing business.

What is Internet Marketing?Internet marketing is the marketing of products or services over the Internet.

Internet Marketing is also known as i-marketing, web-marketing, online-

marketing, Search Engine Marketing (SEM) or e-Marketing.What is Digital Marketing?

Digital Marketing is the practice of promoting products and services using all

forms of digital advertising. It includes Television, Radio, Internet, mobile and

any other form of digital media.

Marketing Mix:

The Marketing Mix model (also known as the 4 P's) can be used by marketers as a

tool to assist in defining the marketing strategy. The idea was that if you couldidentify the right combination of these elements, your marketing would succeed.

E. Jerome McCarthy introduced the 4 P's of Marketing as a way to describe the

mix of factors required to successfully market a product.

The 4 Ps are:

Product

Price

Promotion

Place (distribution)

The 5 Ps of marketing is 4 Ps + People/Packaging/Process/etc.

The 7 Ps of marketing consists of: Product

Price

Place

Promotion

People

Process


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Physical evidence.

The first 4 P's are considered the basis of any marketing process. The last 3 P's are

a recent addition to the entire marketing process.

What is SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT

analysis is a tool for auditing an organization and its environment. It is the firststage of planning and helps marketers to focus on key issues. Strengths and

weaknesses are internal factors. Opportunities and threats are external factors.What is Customer Relationship Management (CRM)?

Customer Relationship Management concerns the relationship between the

organization and its customers. It is a process or methodology used to learn more

about customers' needs and behaviors in order to develop stronger relationshipswith them.

What are the Three Levels of a Product?

Core Product

Actual Product Augmented Product

What is Market Research?

Market research is any organized effort to gather information about markets or

customers. Market research is for discovering what people want, need, or believe.

It can also involve discovering how they act. Once that research is completed, it

can be used to determine how to market your product.

What is Market Information?

To know the prices of the different commodities in the market, as well as the

supply and demand situation.

What is Market Segmentation?

The division of a market into different homogeneous groups of consumers is

known as market segmentation. The purpose for segmenting a market is to allow

your marketing program to focus on the subset of prospects that are "most likely"

to purchase your offering. If done properly this will help to insure the highest

return for your marketing expenditures.What is Branding?

The essence of a product, its quality and competitiveness displayed in the form of

letters, symbols and colours is known as branding.What is Marketing?

The process of planning and executing the concepts, pricing, promotion and

distribution of ideas/goods/services to satisfy individual's/organizational goals is

called marketing.


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Banking Terms

1. What is a Repo Rate?

A: Repo rate is the rate at which our banks borrow rupees from RBI. Whenever

the banks have any shortage of funds they can borrow it from RBI. A reduction in

the repo rate will help banks to get money at a cheaper rate. When the repo rateincreases, borrowing from RBI becomes more expensive.

2. What is Reverse Repo Rate?

A: This is exact opposite of Repo rate. Reverse Repo rate is the rate at which

Reserve Bank of India (RBI) borrows money from banks. RBI uses this tool when

it feels there is too much money floating in the banking system. Banks are always

happy to lend money to RBI since their money is in safe hands with a good

interest. An increase in Reverse repo rate can cause the banks to transfer more

funds to RBI due to this attractive interest rates.

3. What is CRR Rate?

A: Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep

with RBI. If RBI decides to increase the percent of this, the available amount with

the banks comes down. RBI is using this method (increase of CRR rate), to drain

out the excessive money from the banks.3

4. What is SLR Rate?

A: SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to

maintain in the form of cash, or gold or govt. approved securities (Bonds) before

providing credit to its customers.

SLR rate is determined and maintained by the RBI (Reserve Bank of India) inorder to control the expansion of bank credit. SLR is determined as the percentage

of total demand and percentage of time liabilities. Time Liabilities are the

liabilities a commercial bank liable to pay to the customers on their anytime

demand. SLR is used to control inflation and propel growth. Through SLR rate

tuning the money supply in the system can be controlled efficiently.

5. What is Bank Rate?

A: Bank rate, also referred to as the discount rate, is the rate of interest which a

central bank charges on the loans and advances that it extends to commercial

banks and other financial intermediaries. Changes in the bank rate are often used

by central banks to control the money supply.6. What is Inflation?

A: Inflation is as an increase in the price of bunch of Goods and services that

projects the Indian economy. An increase in inflation figures occurs when there is

an increase in the average level of prices in Goods and services. Inflation happens

when there are fewer Goods and more buyers; this will result in increase in the

price of Goods, since there is more demand and less supply of the goods.
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7. What is Deflation?

A: Deflation is the continuous decrease in prices of goods and services. Deflation

occurs when the inflation rate becomes negative (below zero) and stays there for a

longer period.

8. What is PLR?

A: The Prime Interest Rate is the interest rate charged by banks to their most

creditworthy customers (usually the most prominent and stable business

customers). The rate is almost always the same amongst major banks. Adjustments

to the prime rate are made by banks at the same time; although, the prime rate

does not adjust on any regular basis. The Prime Rate is usually adjusted at the

same time and in correlation to the adjustments of the Fed Funds Rate. The ratesreported below are based upon the prime rates on the first day of each respective

month. Some banks use the name "Reference Rate" or "Base Lending Rate" to

refer to their Prime Lending Rate.

9. What is Deposit Rate?

A: Interest Rates paid by a depository institution on the cash on deposit.

10. What is FII?

A: FII (Foreign Institutional Investor) used to denote an investor, mostly in the

form of an institution. An institution established outside India, which proposes to

invest in Indian market, in other words buying Indian stocks. FII's generally buy in

large volumes which has an impact on the stock markets. Institutional Investorsincludes pension funds, mutual funds, Insurance Companies, Banks, etc.

11. What is FDI?

A: FDI (Foreign Direct Investment) occurs with the purchase of the physical

assets or a significant amount of ownership (stock) of a company in another

country in order to gain a measure of management control (Or) A foreign

company having a stake in a Indian Company.

12. What is IPO?

A: IPO is Initial Public Offering. This is the first offering of shares to the general

public from a company wishes to list on the stock exchanges.

13. What is Disinvestment?A: The Selling of the government stake in public sector undertakings.

14. What is Fiscal Deficit?

A: It is the difference between the governments total receipts (excluding

borrowings) and total expenditure. Fiscal deficit in 2009-10 is proposed at 6.8% of

GDP.

15. What is Revenue deficit?


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A: It defines that, where the net amount received (by taxes & other forms) fails to

meet the predicted net amount to be received by the government. Revenue deficit

in 2009-10 is proposed at 4.8% of GDP.

16. What is GDP?

A: The Gross Domestic Product or GDP is a measure of all of the services and

goods produced in a country over a specific period; classically a year. GDP during

2008-09 is 6.7%.

17. What is GNP?

A: Gross National Product is measured as GDP plus income of residents from

investments made abroad minus income earned by foreigners in domestic market.

18. What is National Income?

A: National Income is the money value of all goods and services produced in a

country during the year.

19. What is Per Capita Income?A: The national income of a country, or region, divided by its population. Per

capita income is often used to measure a country's standard of living.Per capita

income during 2008-09 estimated by CSO: Rs.25, 494.

20. What is Vote on Account?

A: A vote-on account is basically a statement ,where the government presents an

estimate of a sum required to meet the expenditure that it incurs during the first

three to four months of an election financial year until a new government is in

place, to keep the machinery running.

21. Difference between Vote on Account and Interim Budget?

A: Vote-on-account deals only with the expenditure side of the government'sbudget, an interim Budget is a complete set of accounts, including both

expenditure and receipts.

22. What is SDR?

A: The SDR (Special Drawing Rights) is an artificial currency created by the IMF

in 1969. SDRs are allocated to member countries and can be fully converted into

international currencies so they serve as a supplement to the official foreign

reserves of member countries. Its value is based on a basket of key international

currencies (U.S. dollar, euro, yen and pound sterling).

23. What is SEZ?

A: SEZ means Special Economic Zone is the one of the part of governmentspolicies in India. A special Economic zone is a geographical region that economic

laws which are more liberal than the usual economic laws in the country. The

basic motto behind this is to increase foreign investment, development of

infrastructure, job opportunities and increase the income level of the people.

What is corporate governance?
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The way in which a company is governed and how it deals with the various

interests of its customers, shareholders, employees and society at large. Corporate

governance is the set of processes, customs, policies, laws, and institutions

affecting the way a corporation (or company) is directed, administered or

controlled.Is defined as the general set of customs, regulations, habits, and laws

that determine to what end a firm should be run. Functions of RBI?

The Reserve Bank of India is the central bank of India, was established on April 1,1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.

The Reserve Bank of India was set up on the recommendations of the Hilton

Young Commission. The commission submitted its report in the year 1926, though

the bank was not set up for nine years.To regulate the issue of Bank Notes and

keeping of reserves with a view to securing monetary stability in India and

generally to operate the currency and credit system of the country to itsadvantage." Banker to the Government: performs merchant banking function for

the central and the state governments; also acts as their banker.Banker to banks:maintains banking accounts of all scheduled banks.

What is monetary policy?

A Monetary policy is the process by which the government, central bank, of a

country controls (i) the supply of money, (ii) availability of money, and (iii) cost

of money or rate of interest, in order to attain a set of objectives oriented towardsthe growth and stability of the economy.

What is Fiscal Policy?

Fiscal policy is the use of government spending and revenue collection to

influence the economy. These policies affect tax rates, interest rates and

government spending, in an effort to control the economy. Fiscal policy is anadditional method to determine public revenue and public expenditure.

What is Core Banking Solutions?

Core banking is a general term used to describe the services provided by a group

of networked bank branches. Bank customers may access their funds and other

simple transactions from any of the member branch offices. It will cut down time,

working simultaneously on different issues and increasing efficiency. The

platform where communication technology and information technology aremerged to suit core needs of banking is known as Core Banking Solutions.

What is bank and its features and types?

A bank is a financial organization where people deposit their money to keep itsafe.Banks play an important role in the financial system and the economy. As a

key component of the financial system, banks allocate funds from savers to

borrowers in an efficient manner.

Regional Rural Banks were established with an objective to ensure sufficientinstitutional credit for agriculture and other rural sectors. The RRBs mobilize

financial resources from rural / semi-urban areas and grant loans and advances


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mostly to small and marginal farmers, agricultural labourers and rural artisans.

The area of operation of RRBs is limited to the area as notified by GoI covering

one or more districts in the State.

ii. Banking services for individual customers is known as retail banking.

iii. A bank that deals mostly in but international finance, long-term loans for

companies and underwriting. Merchant banks do not provide regular bankingservices to the general publiciv. Online banking (or Internet banking) allows customers to conduct financial

transactions on a secure website operated by their retail or virtual bank.

v. Mobile Banking is a service that allows you to do banking transactions on your

mobile phone without making a call , using the SMS facility. Is a term used for

performing balance checks, account transactions, payments etc. via a mobile

device such as a mobile phone.vi. Traditional banking is the normal bank accounts we have. Like, put your

money in the bank and they act as a security and you will get only the normal

interests (decided by RBI in our case, FED bank in US).vii. Investment banking is entirely different. Here, people who are having so much

money (money in excess which will yield only less interest if in Banks) will invest

their money and get higher returns. For example, If i have more money instead oftaking the pain of investing in share market, buying properties etc. I will give to

investment banks and they will do the money management and give me higher

returns when compared to traditional banks.

What is E-Governance?

E-Governance is the public sectors use of information and communication

technologies with the aim of improving information and service delivery,

encouraging citizen participation in the decision-making process and makinggovernment more accountable,transparent and effective.

What is Right to information Act?

The Right to Information act is a law enacted by the Parliament of India giving

citizens of India access to records of the Central Government and State

overnments.The Act applies to all States and Union Territories of India, except

the State of Jammu and Kashmir - which is covered under a State-level law. This

law was passed by Parliament on 15 June 2005 and came fully into force on 13

October 2005.

Credit Rating Agencies in India?

The credit rating agencies in India mainly include ICRA and CRISIL. ICRAwasformerly referred to the Investment Information and Credit Rating Agency of

India Limited. Their main function is to grade the different sector and companies

in terms of performance and offer solutions for up gradation. The credit rating

agencies in India mainly include ICRA and CRISIL(Credit Rating Information

Services of India Limited)

What is Cheque?


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Cheque is a negotiable instrument instructing a Bank to pay a specific amount

from a specified account held in the maker/depositor's name with that Bank.A bill

of exchange drawn on a specified banker and payable on demand.Written order

directing a bank to pay money.

What is demand Draft?

A demand draft is an instrument used for effecting transfer of money. It is aNegotiable Instrument. Cheque and Demand-Draft both are used for Transfer of

money. You can 100% trust a DD. It is a banker's check. A check may bedishonored for lack of funds a DD can not. Cheque is written by an individual and

Demand draft is issued by a bank. People believe banks more than individuals.

What is a NBFC?

A non-banking financial company (NBFC) is a company registered under the

Companies Act, 1956 and is engaged in the business of loans and advances,

acquisition of shares/stock/bonds/debentures/securities issued by government, but

does not include any institution whose principal business is that of agriculture

activity, industrial activity, sale/purchase/construction of immovable property.NBFCs are doing functions akin to that of banks; however there are a few

differences:

(i)A NBFC cannot accept demand deposits (demand deposits are funds deposited

at a depository institution that are payable on demand -- immediately or within a

very short period -- like your current or savings accounts.)(ii) it is not a part of the payment and settlement system and as such cannot issue

cheques to its customers; and

(iii) Deposit insurance facility of DICGC is not available for NBFC depositors

unlike in case of banks.

Diff between banking & Finance?Finance is generally related to all types of financial, this could be accounting,

insurances and policies. Whereas banking is everything that happens in a bank

only.The term Banking and Finance are two very different terms but are often

associated together. These two terms are often used to denote services that a bank

and other financial institutions provide to its customers.

What is NASSCOM ?

The National Association of Software and Services Companies (NASSCOM), theIndian chamber of commerce is a consortium that serves as an interface to the

Indian software industry and Indian BPO industry. Maintaining close interaction

with the Government of India in formulating National IT policies with specificfocus on IT software and services maintaining a state of the art information

database of IT software and services related activities for use of both the software

developers as well as interested companies overseas. Mr. Som Mittal President.Chairman-Pramod Bhasin

What is ASSOCHAM?


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The Associated Chambers of Commerce and Industry of India (ASSOCHAM),

India's premier apex chamber covers a membership of over 2 lakh companies and

professionals across the country. It was established in 1920 by promoter chambers,

representing all regions of India. As an apex industry body, ASSOCHAM

represents the interests of industry and trade, interfaces with Government on

policy issues and interacts with counterpart international organizations to promotebilateral economic issues. President-Swati Piramal

What is NABARD?NABARD was established by an act of Parliament on 12 July 1982 to implement

the National Bank for Agriculture and Rural Development Act 1981. It replaced

the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell

(RPCC) of Reserve Bank of India, and Agricultural Refinance and Development

Corporation (ARDC). It is one of the premiere agency to provide credit in rural

areas. NABARD is set up as an apex Development Bank with a mandate forfacilitating credit flow for promotion and development of agriculture, small-scale

industries, cottage and village industries, handicrafts and other rural crafts. What is SIDBI?

The Small Industries Development Bank of India is a state-run bank aimed to aid

the growth and development of micro, small and medium scale industries in India.

Set up in 1990 through an act of parliament, it was incorporated initially as a

wholly owned subsidiary of Industrial Development Bank of India.

What is SENSEX and NIFTY?

SENSEX is the short term for the words "Sensitive Index" and is associated with

the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was first formed on

1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE.Where as NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF

BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL SHOW DAILY

TRADING MARKS. Sensex and Nifty both are an "index. An index is basically

an indicator it indicates whether most of the stocks have gone up or most of the

stocks have gone down.

What is SEBI?SEBI is the regulator for the Securities Market in India. Originally set up by the

Government of India in 1988, it acquired statutory form in 1992 with SEBI Act

1992 being passed by the Indian Parliament. Chaired by C B Bhave.

What is Mutual funds?Mutual funds are investment companies that pool money from investors at large

and offer to sell and buy back its shares on a continuous basis and use the capital

thus raised to invest in securities of different companies. The mutual fund willhave a fund manager that trades the pooled money on a regular basis. The net

proceeds or losses are then typically distributed to the investors annually.

What is Asset Management Companies?


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A company that invests its clients' pooled fund into securities that match its

declared financial objectives. Asset management companies provide investors

with more diversification and investing options than they would have by

themselves. Mutual funds, hedge funds and pension plans are all run by asset

management companies. These companies earn income by charging service fees to

their clients.

What are non-perfoming assets?

Non-performing assets, also called non-performing loans, are loans,made by a

bank or finance company, on which repayments or interest payments are not being

made on time. A debt obligation where the borrower has not paid any previouslyagreed upon interest and principal repayments to the designated lender for an

extended period of time. The nonperforming asset is therefore not yielding any

income to the lender in the form of principal and interest payments.

What is Recession?

A true economic recession can only be confirmed if GDP (Gross Domestic

Product)growth is negative for a period of two or more consecutive quarters.

What is foreign exchange reservers?

Foreign exchange reserves (also called Forex reserves) in a strict sense are only

the foreign currency deposits and bonds held by central banks and monetary

authorities.However, the term in popular usage commonly includes foreign

exchange and gold,SDRs and IMF reserve positions.

What is Open Market operations (OMO)?

The buying and selling of government securities in the open market in order to

expand or contract the amount of money in the banking system by RBI. Open

market operations are the principal tools of monetary policy.

What is Micro Credit?

It is a term used to extend small loans to very poor people for self-employment

projects that generate income, allowing them to care for themselves and theirfamilies.

What is Liquidity Adjustment Facility(LAF)?

A tool used in monetary policy that allows banks to borrow money through

repurchase agreements. This arrangement allows banks to respond to liquidity

pressures and is used by governments to assure basic stability in the financial

markets.

What is RTGS System?

The acronym 'RTGS' stands for Real Time Gross Settlement. RTGS system is a

funds transfer mechanism where transfer of money takes place from one bank to

another on a 'real time' and on 'gross' basis. This is the fastest possible money

transfer system through the banking channel. Settlement in 'real time' means


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payment transaction is not subjected to any waiting period. The transactions are

settled as soon as they are processed. 'Gross settlement' means the transaction is

settled on one to one basis without bunching with any other transaction.

What is Bancassurance?

It is the term used to describe the partnership or relationship between a bank andan insurance company whereby the insurance company uses the bank sales

channel in order to sell insurance products.

What is Wholesale Price Index(WPI)?

The Wholesale Price Index (WPI) is the index used to measure the changes in the

average price level of goods traded in wholesale market. A total of

435 commodity prices make up the index. It is available on a weekly basis. It isgenerally taken as an indicator of the inflation rate in the Indian economy.

The Indian Wholesale Price Index (WPI) was first published in 1902, and was

used by policy makers until it was replaced by the Producer Price Index (PPI) in

1978. What is Consumer price Index(CPI)?

It is a measure estimating the average price of consumer

goods and services purchased by households.

What is Venture Capital?

Venture capital is money provided by an outside investor to finance a new,

growing, or troubled business. The venture capitalist provides the fundingknowing that theres a significant risk associated with the companys future profits

and cash flow. Capital is invested in exchange for an equity stake in the business

rather than given as a loan, and the investor hopes the investment will yield a

better-than-average return. What is a Treasury Bills?

Treasury Bills (T-Bills) are short term, Rupee denominated obligations issued by

the Reserve Bank of India (RBI) on behalf of the Government of India. They are

thus useful in managing short-term liquidity. At present, the Government of India

issues three types of treasury bills through auctions, namely, 91-day, 182-day and

364-day. There are no treasury bills issued by State Governments.

What is Banking Ombudsmen Scheme?

The Banking Ombudsman Scheme enables an expeditious and inexpensive forum

to bank customers for resolution of complaints relating to certain services rendered

by banks.The Banking Ombudsman is a senior official appointed by the Reserve Bank of

India to redress customer complaints against deficiency in certain banking

services.

The Banking Ombudsman Scheme was first introduced in India in 1995, and was

revised in 2002. The current scheme became operative from the 1 January 2006,

and replaced and superseded the banking Ombudsman Scheme 2002.


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What is Subsidy?

A subsidy is a form of financial assistance paid to a business or economic sector.

Most subsidies are made by the government to producers or distributors in

an industry to prevent the decline of that industry or an increase in the prices of its

products or to encourage it to hire more labor.

What is a Debenture? How many types of debentures are there? What are they?A debenture is basically an unsecured loan to a corporation. A type of debt

instrument that is not secured by physical asset. Debentures are backed only by the

general creditworthiness and reputation of the issuer.

i)Convertible Debentures: Any type of debenture that can be converted into some

other security or it can be converted into stock..ii)Non-Convertibility Debentures(NCB): Non Convertible Debentures are those

that cannot be converted into equity shares of the issuing company, as opposed to

Convertible debentures. Non-convertible debentures normally earn a higher

interest rate than convertible debentures do.

What is a hedge fund?Hedge means to reduce financial risk.

A hedge fund is an investment fund open to a limited range of investors and

requires a very large initial minimum investment. It is important to note that

hedging is actually the practice of attempting to reduce risk, but the goal of

most hedge funds is to maximize return on investment.

What is FCCB?

A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond

issued in a currency different than the issuers domestic currency. In other words,

the money being raised by the issuing company is in the form of

a foreign currency. A company may issue an FCCB if it intends to make alarge investment in a country using that foreign currency.

What is Capital Account Convertibility(CAC)?

It is the freedom to convert local financial assets into foreign financial assets and

vice versa at market determined rates of exchange. This means that capital account

convertibility allows anyone to freely move from local currency into foreign

currency and back.

The Reserve Bank of India has appointed a committee to set out the framework for

fuller Capital Account Convertibility.

Capital account convertibility is considered to be one of the major features of a

developed economy. It helps attract foreign investment. capital accountconvertibility makes it easier for domestic companies to tap foreign markets.

What is Current Account Convertibility?

It defines at one can import and export goods or receive or make payments for

services rendered. However, investments and borrowings are restricted.


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What is Arbitrage?

The opportunity to buy an asset at a low price then immediately selling it on a

different market for a higher price.

What is Capitalism?

Capitalism as an economy is based on a democratic political ideology and

produces a free market economy, where businesses are privately owned andoperated for profit; in capitalism, all of the capital investments and decisions about

production, distribution, and the prices of goods, services, and labor, are

determined in the free market and affected by the forces of supply and demand.

What is Socialism?Socialism as an economy is based on a collectivist type of political ideology and

involves the running of businesses to benefit the common good of a vast majority

of people rather than of a small upper class segment of society.

Banking Terms for interview

Learn about the basic banking terms used. These terms are useful for your general

knowledge as well as for your interview. Personal interview plays a very crucial role infinal selection. Also these bank related terms are useful for Commerce students, MBA

students.

Knowing basic banking terms not only gives you an edge over other candidates but also

shows your interest level for the job.

RBI The Reserve Bank of India is the apex bank of the country, which was constitutedunder the RBI Act, 1934 to regulate the other banks, issue of bank notes and maintenance

of reserves with a view to securing the monetary stability in India.

Demand Deposit A Demand deposit is the one which can be withdrawn at any time,without any notice or penalty; e.g. money deposited in a checking account or savings

account in a bank.

Time Deposit Time deposit is a money deposit at a banking institution that cannot be

withdrawn for a certain "term" or period of time. When the term is over it can bewithdrawn or it can be held for another term.

Fixed Deposits FDs are the deposits that are repayable on fixed maturity date along

with the principal and agreed interest rate for the period. Banks pay higher interest rateson FDs than the savings bank account.

Recurring Deposits These are also called cumulative deposits and in recurring depositaccounts, a certain amounts of savings are required to be compulsorily deposited at

specific intervals for a specified period.


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Savings Account Savings account is an account generally maintained by retail

customers that deposit money (i.e. their savings) and can withdraw them whenever they

need. Funds in these accounts are subjected to low rates of interest.

Current Accounts These accounts are maintained by the corporate clients that may be

operated any number of times in a day. There is a maintenance charge for the currentaccounts for which the holders enjoy facilities of easy handling, overdraft facility etc.

FCNR Accounts Foreign Currency Non-Resident accounts are the ones that aremaintained by the NRIs in foreign currencies like USD, DM, and GBP etc. The account

is a term deposit with interest rates linked to the international rates of interest of the

respective currencies.

NRE Accounts Non-Resident External accounts are the ones in which NRIs remitmoney in any permitted foreign currency and the remittance is converted to Indian rupees

for credit to NRE accounts. The accounts can be in the form of current, saving, FDs,

recurring deposits. The interest rates and other terms of these accounts are as per the RBIdirectives.

Cheque Book - A small, bound booklet of cheques. A cheque is a piece of paper

produced by your bank with your account number, sort-code and cheque number printed

on it. The account number distinguishes your account from other accounts; the sort-codeis your bank's special code which distinguishes it from any other bank.

**Knowing basic banking terms not only gives you an edge over other candidates but

also shows your interest level for the job. So my suggestion would be that you through all

the banking terms thoroughly.

Cheque Clearing - This is the process of getting the money from the cheque-writer'saccount into the cheque receiver's account.

Clearing Bank - This is a bank that can clear funds between banks. For general

purposes, this is any institution which we know of as a bank or as a provider of banking

services.

Bounced Cheque - when the bank has not enough funds in the relevant account or the

account holder requests that the cheque is bounced (under exceptional circumstances)

then the bank will return the cheque to the account holder. The beneficiary of the cheque

will have not been paid. This normally incurs a fee from the bank.

Credit Rating - This is the rating which an individual (or company) gets from the credit

industry. This is obtained by the individual's credit history, the details of which are

available from specialist organisations like CRISIL in India.

Credit-Worthiness - This is the judgement of an organization which is assessingwhether or not to take a particular individual on as a customer. An individual might be


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considered credit-worthy by one organisation but not by another. Much depends on

whether an organization is involved with high risk customers or not.

Interest - The amount paid or charged on money over time. If you borrow money interestwill be charged on the loan. If you invest money, interest will be paid (where appropriate

to the investment).

Overdraft - This is when a person has a minus figure in their account. It can be

authorized (agreed to in advance or retrospect) or unauthorized (where the bank has notagreed to the overdraft either because the account holder represents too great a risk to

lend to in this way or because the account holder has not asked for an overdraft facility).

Payee - The person who receives a payment. This often applies to cheques. If you receive

a cheque you are the payee and the person or company who wrote the cheque is thepayer.

Payer - The person who makes a payment. This often applies to cheques. If you write acheque you are the payer and the recipient of the cheque is the payee.

Security for Loans - Where large loans are required the lending institution often needs to

have a guarantee that the loan will be paid back. This takes the form of a large item ofcapital outlay (typically a house) which is owned or partly owned and the amount owned

is at least equivalent to the loan required.

Internet Banking - Online banking (or Internet banking) allows customers to conductfinancial transactions on a secure website operated by the bank.

Credit Card - A credit card is one of the systems of payments named after the smallplastic card issued to users of the system. It is a card entitling its holder to buy goods and

services based on the holder's promise to pay for these goods and services.

Debit Card Debit card allows for direct withdrawal of funds from customers bankaccounts. The spending limit is determined by the available balance in the account.

Loan - A loan is a type of debt. In a loan, the borrower initially receives or borrows an

amount of money, called the principal, from the lender, and is obligated to pay back or

repay an equal amount of money to the lender at a later time. There are different kinds ofloan such as the house loan, auto loan etc.

Bank Rate - This is the rate at which central bank (RBI) lends money to other banks or

financial institutions. If the bank rate goes up, long-term interest rates also tend to move

up, and vice-versa.

CRR - CRR means Cash Reserve Ratio. Banks in India are required to hold a certain

proportion of their deposits in the form of cash with Reserve Bank of India (RBI). This

minimum ratio is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio.


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Thus, When a banks deposits increase by Rs100, and if the cash reserve ratio is 9%, the

banks will have to hold additional Rs 9 with RBI and Bank will be able to use only Rs 91

for investments and lending / credit purpose. Therefore, higher the ratio (i.e. CRR), thelower is the amount that banks will be able to use for lending and investment. This

power of RBI to reduce the lendable amount by increasing the CRR makes it an

instrument in the hands of a central bank through which it can control the amount thatbanks lend. Thus, it is a tool used by RBI to control liquidity in the banking system.

SLR - SLR stands for Statutory Liquidity Ratio. This term is used by bankers and

indicates the minimum percentage of deposits that the bank has to maintain in form of

gold, cash or other approved securities. Thus, we can say that it is ratio of cash and someother approved to liabilities (deposits). It regulates the credit growth in India.

ATM - An automated teller machine (ATM) is a computerised telecommunications

device that provides the clients with access to financial transactions in a public space

without the need for a cashier, human clerk or bank teller. On most modern ATMs, the

customer is identified by inserting a plastic ATM card with a magnetic stripe or a plasticsmart card with a chip, that contains a unique card number and some security information

such as an expiration date or CVV. Authentication is provided by the customer entering apersonal identification number (PIN)

Accrued interest: Interest due from issue date or from the last coupon payment

date to the settlement date. Accrued interest on bonds must be added to their

purchase price.

Arbitrage: Buying a financial instrument in one market in order to sell the same

instrument at a higher price in another market.

Ask Price: The lowest price at which a dealer is willing to sell a given security.

Asset-Backed Securities (ABS): A type of security that is backed by a pool ofbank loans, leases, and other assets. Most ABS are backed by auto loans and

credit cards these issues are very similar to mortgage-backed securities.

At-the-money: The exercise price of a derivative that is closest to the marketprice of the underlying instrument.

Basis Point: One hundredth of 1%. A measure normally used in the statement of

interest rate e.g., a change from 5.75% to 5.81% is a change of 6 basis points.

Bear Markets: Unfavorable markets associated with falling prices and investor

pessimism.

Bid-ask Spread: The difference between a dealers bid and ask price.

Bid Price: The highest price offered by a dealer to purchase a given security.

Blue Chips: Blue chips are unsurpassed in quality and have a long and stable

record of earnings and dividends. They are issued by large and well-establishedfirms that have impeccable financial credentials.

Bond: Publicly traded long-term debt securities, issued by corporations and

governments, whereby the issuer agrees to pay a fixed amount of interest over a

specified period of time and to repay a fixed amount of principal at maturity. Book Value: The amount of stockholders equity in a firm equals the amount of

the firms assets minus the firms liabilities and preferred stock. /p>


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Broker: Individuals licensed by stock exchanges to enable investors to buy and

sell securities.

Brokerage Fee: The commission charged by a broker.

Bull Markets: Favorable markets associated with rising prices and investor

optimism.

Call Option: The right to buy the underlying securities at a specified exerciseprice on or before a specified expiration date.

Callable Bonds: Bonds that give the issuer the right to redeem the bonds before

their stated maturity.

Capital Gain: The amount by which the proceeds from the sale of a capital asset

exceed its original purchase price.

Capital Markets: The market in which long-term securities such as stocks and

bonds are bought and sold. Certificate of Deposits (CDs): Savings instrument in which funds must remain

on deposit for a specified period, and premature withdrawals incur interest

penalties.

Closed-end (Mutual) Fund: A fund with a fixed number of shares issued, and alltrading is done between investors in the open market. The share prices are

determined by market prices instead of their net asset value.

Collateral: A specific asset pledged against possible default on a bond. Mortgage

bonds are backed by claims on property. Collateral trusts bonds are backed by

claims on other securities. Equipment obligation bonds are backed by claims on

equipment. Commercial Paper: Short-term and unsecured promissory notes issued by

corporations with very high credit standings.

Common Stock: Equity investment representing ownership in a corporation; eachshare represents a fractional ownership interest in the firm.

Compound Interest: Interest paid not only on the initial deposit but also on any

interest accumulated from one period to the next.

Contract Note: A note which must accompany every security transaction which

contains information such as the dealers name (whether he is acting as principal

or agent) and the date of contract.

Controlling Shareholder: Any person who is, or group of persons who together

are, entitled to exercise or control the exercise of a certain amount of shares in a

company at a level (which differs by jurisdiction) that triggers a mandatory

general offer, or more of the voting power at general meetings of the issuer, orwho is or are in a position to control the composition of a majority of the board of

directors of the issuer.

Convertible Bond: A bond with an option, allowing the bondholder to exchangethe bond for a specified number of shares of common stock in the firm. A

conversion price is the specified value of the shares for which the bond may be

exchanged. The conversion premium is the excess of the bonds value over theconversion price.

Corporate Bond: Long-term debt issued by private corporations.

Coupon: The feature on a bond that defines the amount of annual interest income.

Coupon Frequency: The number of coupon payments per year.


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Coupon Rate: The annual rate of interest on the bonds face value that a bonds

issuer promises to pay the bondholder. It is the bonds interest payment per dollar

of par value.

Covered Warrants: Derivative call warrants on shares which have been

separately deposited by the issuer so that they are available for delivery upon

exercise. Credit Rating: An assessment of the likelihood of an individual or business being

able to meet its financial obligations. Credit ratings are provided by credit

agencies or rating agencies to verify the financial strength of the issuer forinvestors.

Currency Board: A monetary system in which the monetary base is fully backed

by foreign reserves. Any changes in the size of the monetary base has to be fully

matched by corresponding changes in the foreign reserves. Current Yield: A return measure that indicates the amount of current income a

bond provides relative to its market price. It is shown as: Coupon Rate divided by

Price multiplied by 100%.

Custody of Securities: Registration of securities in the name of the person towhom a bank is accountable, or in the name of the banks nominee; plus

deposition of securities in a designated account with the banks bankers or withany other institution providing custodial services.

Default Risk: The possibility that a bond issuer will default ie, fail to repay

principal and interest in a timely manner.

Derivative Call (Put) Warrants: Warrants issued by a third party which grantthe holder the right to buy (sell) the shares of a listed company at a specified

price.

Derivative Instrument: Financial instrument whose value depends on the valueof another asset.

Discount Bond: A bond selling below par, as interest in-lieu to the bondholders.

Diversification: The inclusion of a number of different investment vehicles in aportfolio in order to increase returns or be exposed to less risk.

Duration: A measure of bond price volatility, it captures both price and

reinvestment risks to indicate how a bond will react to different interest rateenvironments.

Earnings: The total profits of a company after taxation and interest.

Earnings per Share (EPS): The amount of annual earnings available to common

stockholders as stated on a per share basis.

Earnings Yield: The ratio of earnings to price (E/P). The reciprocal is price

earnings ratio (P/E).

Equity: Ownership of the company in the form of shares of common stock.

Equity Call Warrants: Warrants issued by a company which give the holder the

right to acquire new shares in that company at a specified price and for a specified

period of time.

Ex-dividend (XD): A security which no longer carries the right to the most

recently declared dividend or the period of time between the announcement of the

dividend and the payment (usually two days before the record date). For

transactions during the ex-dividend period, the seller will receive the dividend,


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not the buyer. Ex-dividend status is usually indicated in newspapers with an (x)

next to the stocks or unit trusts name.

Face Value/ Nominal Value: The value of a financial instrument as stated on theinstrument. Interest is calculated on face/nominal value.

Fixed-income Securities: Investment vehicles that offer a fixed periodic return.

Fixed Rate Bonds: Bonds bearing fixed interest payments until maturity date. Floating Rate Bonds: Bonds bearing interest payments that are tied to current

interest rates.

Fundamental Analysis: Research to predict stock value that focuses on suchdeterminants as earnings and dividends prospects, expectations for future interest

rates and risk evaluation of the firm.

Future Value: The amount to which a current deposit will grow over a period of

time when it is placed in an account paying compound interest. Future Value of an Annuity: The amount to which a stream of equal cash flows

that occur in equal intervals will grow over a period of time when it is placed in

an account paying compound interest.

Futures Contract: A commitment to deliver a certain amount of some specifieditem at some specified date in the future.

Hedge: A combination of two or more securities into a single investment positionfor the purpose of reducing or eliminating risk.

Income: The amount of money an individual receives in a particular time period.

Index Fund: A mutual fund that holds shares in proportion to their representation

in a market index, such as the S&P 500. Initial Public Offering (IPO): An event where a company sells its shares to the

public for the first time. The company can be referred to as an IPO for a period of

time after the event.

Inside Information: Non-public knowledge about a company possessed by its

officers, major owners, or other individuals with privileged access to information.

Insider Trading: The illegal use of non-public information about a company tomake profitable securities transactions

Intrinsic Value: The difference of the exercise price over the market price of the

underlying asset.

Investment: A vehicle for funds expected to increase its value and/or generate

positive returns.

Investment Adviser: A person who carries on a business which provides

investment advice with respect to securities and is registered with the relevantregulator as an investment adviser.

IPO price: The price of share set before being traded on the stock exchange.

Once the company has gone Initial Public Offering, the stock price is determinedby supply and demand.

Junk Bond: High-risk securities that have received low ratings (i.e. Standard &

Poors BBB rating or below; or Moodys BBB rating or below) and as such,produce high yields, so long as they do not go into default.

Leverage Ratio: Financial ratios that measure the amount of debt being used to

support operations and the ability of the firm to service its debt.


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Libor: The London Interbank Offered Rate (or LIBOR) is a daily reference rate

based on the interest rates at which banks offer to lend unsecured funds to other

banks in the London wholesale money market (or interbank market). The LIBORrate is published daily by the British Bankers Association and will be slightly

higher than the London Interbank Bid Rate (LIBID), the rate at which banks are

prepared to accept deposits. Limit Order: An order to buy (sell) securities which specifies the highest

(lowest) price at which the order is to be transacted.

Limited Company: The passive investors in a partnership, who supply most ofthe capital and have liability limited to the amount of their capital contributions.

Liquidity: The ability to convert an investment into cash quickly and with little or

no loss in value.

Listing: Quotation of the Initial Public Offering companys shares on the stockexchange for public trading.

Listing Date: The date on which Initial Public Offering stocks are first traded on

the stock exchange by the public

Margin Call: A notice to a client that it must provide money to satisfy aminimum margin requirement set by an Exchange or by a bank / broking firm.

Market Capitalization: The product of the number of the companys outstandingordinary shares and the market price of each share.

Market Maker: A dealer who maintains an inventory in one or more stocks and

undertakes to make continuous two-sided quotes.

Market Order: An order to buy or an order to sell securities which is to beexecuted at the prevailing market price.

Money Market: Market in which short-term securities are bought and sold.

Mutual Fund: A company that invests in and professionally manages adiversified portfolio of securities and sells shares of the portfolio to investors.

Net Asset Value: The underlying value of a share of stock in a particular mutual

fund; also used with preferred stock.

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

already in issue.

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

Open-end (Mutual) Fund: There is no limit to the number of shares the fund can

issue. The fund issues new shares of stock and fills the purchase order with those

new shares. Investors buy their shares from, and sell them back to, the mutualfund itself. The share prices are determined by their net asset value.

Open Offer: An offer to current holders of securities to subscribe for securities

whether or not in proportion to their existing holdings.

Option: A security that gives the holder the right to buy or sell a certain amount

of an underlying financial asset at a specified price for a specified period of time.

Oversubscribed: When an Initial Public Offering has more applications thanactual shares available. Investors will often apply for more shares than required in

anticipation of only receiving a fraction of the requested number. Investors and

underwriters will often look to see if an IPO is oversubscribed as an indication of

the publics perception of the business potential of the IPO company.


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

Par Value: The face value of a security.

Perpetual Bonds: Bonds which have no maturity date.

Placing: Obtaining subscriptions for, or the sale of, primary market, where the

new securities of issuing companies are initially sold.

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

Preference Shares: A corporate security that pays a fixed dividend each period.

It is senior to ordinary shares but junior to bonds in its claims on corporateincome and assets in case of bankruptcy.

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

intrinsic value.

Premium Bond: Bond selling above par. Present Value: The amount to which a future deposit will discount back to

present when it is depreciated in an account paying compound interest.

Present Value of an Annuity: The amount to which a stream of equal cash flows

that occur in equal intervals will discount back to present when it is depreciated inan account paying compound interest.

Price/Earnings Ratio (P/E): The measure to determine how the market is pricingthe companys common stock. The price/earnings (P/E) ratio relates the

companys earnings per share (EPS) to the market price of its stock.

Privatization: The sale of government-owned equity in nationalized industry or

other commercial enterprises to private investors. Prospectus: A detailed report published by the Initial Public Offering company,

which includes all terms and conditions, application procedures, IPO prices etc,

for the IPO

Put Option: The right to sell the underlying securities at a specified exercise

price on of before a specified expiration date.

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

Real Interest Rate: The net interest rate over the inflation rate. The growth rate

of purchasing power derived from an investment.

Redemption Value: The value of a bond when redeemed.

Reinvestment Value: The rate at which an investor assumes interest payments

made on a bond which can be reinvested over the life of that security.

Relative Strength Index (RSI): A stocks price that changes over a period oftime relative to that of a market index such as the Standard & Poors 500, usually

measured on a scale from 1 to 100, 1 being the worst and 100 being the best.

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

Resistance Level: A price at which sellers consistently outnumber buyers,

preventing further price rises.

Return: Amount of investment gain or loss.

Rights Issue: An offer by way of rights to current holders of securities that allows

them to subscribe for securities in proportion to their existing holdings.


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

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

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

forgreaterrisk.

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

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

dividends.

Short Hedge: A transaction that protects the value of an asset held by taking a

short position in a futures contract.

Settlement: Conclusion of a securities transaction when a customer pays a

broker/dealer for securities purchased or delivered, securities sold, and receivesfrom the broker the proceeds of a sale.

Short Position: Investors sell securities in the hope that they will decrease in

value and can be bought at a later date for profit.

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

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

Stock Splits: Wholesale changes in the number of shares. For example, a two for

one split doubles the number of shares but does not change the share capital.

Subordinated Bond: An issue that ranks after secured debt, debenture, and other bonds, and after some general creditors in its claim on assets and earnings.

Owners of this kind of bond stand last in line among creditors, but before equity

holders, when an issuer fails financially.

Substantial Shareholder: A person acquires an interest in relevant share capital

equal to, or exceeding, 10% of the share capital.

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

Technical Analysis: A method of evaluating securities by relying on the

assumption that market data, such as charts of price, volume, and open interest,can help predict future (usually short-term) market trends. Contrasted with

fundamental analysis which involves the study of financial accounts and other

information about the company. (It is an attempt to predict movements in security

prices from their trading volume history.)

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

Trading Rules: Stipulation of parameters for opening and intra-day quotations,

permissible spreads according to the prices of securities available for trading andboard lot sizes for each security.

Trust Deed: A formal document that creates a trust. It states the purpose and

terms of the name of the trustees and beneficiaries.

Underlying Security: The security subject to being purchased or sold upon

exercise of the option contract.

Valuation: Process by which an investor determines the worth of a security using

risk and return concept.


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Warrant: An option for a longer period of time giving the buyer the right to buy

a number of shares of common stock in company at a specified price for a

specified period of time.

Window Dressing: Financial adjustments made solely for the purpose of

accounting presentation, normally at the time of auditing of company accounts.

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

Yield to Maturity: The rate of return yield by a bond held to maturity when both

compound interest payments and the investors capital gain or loss on the securityare taken into account.

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

par value.

Documents

Marketing Concepts for Bank Exams