Ask Anything, Know Better
October 10
September 24 What Are Unclaimed Bank Deposits? Unclaimed deposits are balances lying in savings accounts, fixed deposits, recurring deposits, or other bank accounts that have had no customer activity for 10 years or more. After this period, banks are required to transfer these amounts to the Depositor Education and Awareness Fund (DEAF), maintained by the Reserve Bank of India (RBI). Importantly, these deposits are not forfeited. Depositors or their legal heirs can still claim the money at any time through the bank, which then seeks...
August 22 WHAT? The Cheque Truncation System (CTS) is a process introduced by the Reserve Bank of India (RBI) to streamline and expedite cheque clearing by replacing the physical movement of cheques with digital images and electronic data. It enhances efficiency, reduces costs, and minimizes risks associated with traditional cheque processing. CTS is an electronic cheque-clearing system where the physical cheque is "truncated" (stopped) at the presenting bank, and its digital image, along with relevant data (e.g.,...
August 13 WHAT? A Forward Rate Agreement (FRA) is a financial contract between two parties to lock in an interest rate for a future period, used primarily to hedge against or speculate on interest rate fluctuations. It is an over-the-counter (OTC) derivative instrument, meaning it is customized and not traded on exchanges. An FRA is an agreement to exchange a fixed interest rate for a floating interest rate (based on a reference rate like MIBOR in India or SOFR globally) on a notional amount for a specified future period. It is...
August 09 CONTEXT ICICI Bank hikes minimum account balance for urban areas to ₹50,000. But why is minimum balance required? Banks often require a minimum balance or deposit as part of opening and maintaining an account, though the terms can sometimes overlap. A minimum opening deposit is the initial amount (typically ₹2000-₹10,000) needed to fund and activate a new account, while a minimum balance refers to an ongoing requirement to keep a certain amount in the account to avoid fees or penalties. KEY...
August 04 WHAT? The National Asset Reconstruction Company Limited (NARCL), often referred to as India’s “bad bank,” was established to address the issue of non-performing assets (NPAs) in the Indian banking system. It was announced in the Union Budget 2021–22 and incorporated on July 7, 2021, under the Companies Act, 2013, with registration as an Asset Reconstruction Company (ARC) under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act,...
July 23 WHAT? The Reserve Bank of India (RBI) publishes the Financial Inclusion Index (FI-Index) annually to measure the extent of financial inclusion across India. Financial inclusion means including more and more people in the formal banking network. The FI-Index is a comprehensive metric that quantifies financial inclusion on a scale from 0 (complete financial exclusion) to 100 (full financial inclusion). It incorporates 97 indicators across banking, investments, insurance, postal, and pension sectors, developed in...
July 21 WHAT? The SWIFT system (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network that facilitates secure, standardized, and reliable communication for financial transactions between banks and financial institutions worldwide. It plays a critical role in international finance, including India’s oil trade with Russia. Main Points About the SWIFT System Definition and Purpose: SWIFT is a cooperative society founded in 1973, headquartered in La Hulpe,...
July 07 WHAT? The Unified Payments Interface (UPI), Aadhaar Enabled Payment System (AEPS), and Prepaid Payment Instruments (PPI) are distinct digital payment systems in India, each serving unique purposes and user bases. Differences Aspect Unified Payments Interface (UPI) Aadhaar Enabled Payment System (AEPS) Prepaid Payment Instruments (PPI) Definition Real-time mobile-based payment system enabling instant bank-to-bank transfers using Virtual Payment Addresses...
July 02 WHAT? Gross Non-Performing Assets (Gross NPA) and Net Non-Performing Assets (Net NPA) are key indicators of the health of a bank's loan portfolio in India, reflecting the level of bad loans or assets that have stopped generating income. Gross NPA Banks extend loans to the borrowers and since these loans earns interest for the banks, they are considered Bank Assets. Banks expect a return on these assets like interest income. But if the borrower doesnt pay it's due principal or interest or both on...
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