Banking and Financial Terms - Revision Sheet
5-8 questions come from definitions. Learn the exact meaning, the time limits and the numbers attached to each term.
1. Asset classification (IRAC norms)
| Category | Days overdue / condition |
|---|---|
| SMA-0 | 1-30 days |
| SMA-1 | 31-60 days |
| SMA-2 | 61-90 days |
| NPA | More than 90 days overdue |
| Sub-standard | NPA for up to 12 months |
| Doubtful | Sub-standard for more than 12 months |
| Loss | Loss identified but not yet written off |
- Agriculture: short-duration crops - NPA if overdue for two crop seasons; long-duration crops - one crop season.
- Write-off: loan removed from the books, recovery continues. Waiver: liability extinguished.
- Evergreening: fresh loans to a stressed borrower to hide default.
- NARCL (2021) is the 'bad bank'; IDRCL manages resolution.
2. Lending rate regimes
| Regime | From |
|---|---|
| BPLR | 2003 (till June 2010) |
| Base Rate | 1 July 2010 |
| MCLR | 1 April 2016 |
| External Benchmark (EBLR, mostly repo-linked) | 1 October 2019 for new floating retail and MSME loans |
3. Money market instruments
| Instrument | Tenor | Issued by |
|---|---|---|
| Call money | Overnight | Inter-bank |
| Notice money | 2-14 days | Inter-bank |
| Term money | 15 days - 1 year | Inter-bank |
| Treasury Bills | 91, 182, 364 days | RBI for Government; zero-coupon, issued at discount |
| Commercial Paper | 7 days - 1 year | Rated corporates, PDs, AIFIs |
| Certificate of Deposit | 7 days - 1 year (banks); 1-3 years (FIs) | Banks and FIs; minimum Rs 5 lakh |
4. Bonds with nicknames
| Bond | Market / currency |
|---|---|
| Masala | Rupee bond issued outside India (first by IFC, 2014) |
| Samurai | Japan, yen |
| Yankee | USA, dollar |
| Bulldog | UK, pound |
| Kangaroo / Matilda | Australia |
| Panda | Mainland China, yuan |
| Dim sum | Yuan bond issued outside mainland China (Hong Kong) |
5. Charges on securities
| Charge | Asset | Possession |
|---|---|---|
| Hypothecation | Movable (vehicle, stock) | Borrower |
| Pledge | Movable (gold, goods) | Lender |
| Mortgage | Immovable (land, building) | Usually borrower; equitable mortgage by deposit of title deeds |
| Lien | Any | Right to retain until dues are paid |
6. Trade finance and accounts
- Letter of Credit: bank promises to pay the exporter against specified documents.
- Bank guarantee: invoked only if the applicant fails to perform.
- Factoring: sale of short-term receivables; forfaiting: medium-term export receivables, without recourse.
- Nostro = our account with you (abroad, in foreign currency); Vostro = your account with us; Loro = their account.
- Escrow: funds held by a third party until conditions are met.
- CASA: current + savings deposits - cheap funds that lift the Net Interest Margin.
7. Capital market terms
- IPO (first issue), FPO (later public issue), rights issue (existing shareholders), OFS (existing holders sell).
- Green Shoe option: over-allotment of up to 15% to stabilise post-listing price.
- ADR (US market), GDR (other global markets such as London, Luxembourg).
- Bull = rising market, bear = falling market, stag = IPO flipper.
- Sensex: 30 stocks, base 1978-79 = 100. Nifty 50: 50 stocks, base November 1995 = 1000.
- Credit rating agencies: CRISIL (1987, first), ICRA (1991), CARE (1993); regulated by SEBI.
8. Basel norms
| Accord | Year | Key idea |
|---|---|---|
| Basel I | 1988 | Minimum capital 8% of risk-weighted assets (credit risk) |
| Basel II | 2004 | Three pillars: minimum capital, supervisory review, market discipline |
| Basel III | 2010 | Higher quality capital, buffers, leverage and liquidity ratios |
| Basel III as applied by RBI | Requirement |
|---|---|
| Minimum CET1 | 5.5% |
| Capital Conservation Buffer | 2.5% |
| Minimum total CRAR | 9% (11.5% with CCB) |
| Counter-cyclical buffer | 0-2.5% (activated when required) |
| Liquidity Coverage Ratio | 100% - covers 30-day stress outflows |
| Net Stable Funding Ratio | 100% - one-year horizon |
9. Fiscal and economic terms
- Fiscal deficit = total expenditure minus total receipts excluding borrowings (2026-27 BE: 4.3% of GDP).
- Revenue deficit = revenue expenditure minus revenue receipts.
- Primary deficit = fiscal deficit minus interest payments (2026-27 BE: about 0.7% of GDP).
- Stagflation: high inflation + stagnant growth + unemployment. Disinflation: slower rise in prices. Deflation: falling price level.
- Laffer curve: tax rate vs tax revenue. Phillips curve: inflation vs unemployment. Lorenz curve / Gini coefficient: inequality (0 = equal, 1 = unequal).
Number trap: CRAR in India is 9%, not the Basel minimum of 8%. With CCB it is 11.5%.