Indian banking glossary
Quick comparisons
Two pairs bankers most often confuse, side by side.
CRR vs SLR
Both are reserve requirements on net demand & time liabilities (NDTL). See the live policy dashboard and the Financial Markets rulebook.
Repo vs Reverse repo
Since 2022 the Standing Deposit Facility (SDF) is the RBI’s main liquidity-absorption tool. Track changes on the live repo-rate dashboard.
Tier 1 vs Tier 2 capital
Together they make up a bank’s total regulatory capital (CRAR), over and above the 2.5% capital-conservation buffer. See the live Bank Health Scores and the Capital & Basel rules.
Types of RBI-regulated banks & lenders
The distinct bank and lender classes the RBI regulates — each defined in plain English below and grouped here as one family for quick reference.
Scheduled Commercial Bank (SCB) · Universal bank · Co-operative Bank · NBFC · Differentiated bank · Payments Bank · Small Finance Bank (SFB) · Regional Rural Bank (RRB) · Local Area Bank (LAB)
Deferred Payment Guarantee (DPG)
A guarantee a bank issues to cover a buyer's obligation to pay for capital goods or services in instalments over time, rather than upfront. The bank undertakes to meet each instalment as it falls due if the buyer defaults, letting the buyer acquire plant or machinery on deferred terms while the seller relies on the bank's standing instead of the buyer's. It is a non-fund-based exposure that carries the same credit risk as any guarantee, so bankers appraise the buyer's repayment capacity and take margin and security much as they would for a term loan. Bank guarantee →
Escrow account / mechanism
An arrangement where a borrower's specified cash flows — typically project or sales receipts — are routed into a designated account whose operation follows an agreed waterfall, so that dues such as statutory payments and lender repayments are met in a fixed priority before any surplus reaches the borrower. The bank or an appointed agent administers the account on terms set in an escrow agreement, giving lenders comfort that earmarked receivables actually service the debt. Bankers use it to ring-fence cash flows in infrastructure, trade and stressed-asset situations without taking the funds onto their own books. Working capital →
Cheque Truncation System (CTS)
An image-based cheque-clearing system in which a cheque's electronic image and key data are captured and exchanged between banks instead of physically moving the paper instrument. By stopping the cheque at the presenting point and clearing it digitally, it cuts the time and cost of collection and standardises cheques to defined security features. Bankers treat it as the rail that made cheque clearing faster and nationwide, sitting alongside the electronic transfer systems for non-cash payments. NEFT / RTGS →
Inter-Creditor Agreement (ICA)
A pact signed by all lenders to a stressed borrower so that a resolution plan approved by the required majority — by value and by number of lenders — binds every signatory, including dissenters. Mandated under the RBI’s Prudential Framework for Resolution of Stressed Assets, the ICA stops a single hold-out lender from blocking an otherwise viable turnaround. DoR rulebook →
Resolution Plan (RP)
The time-bound plan lenders frame to deal with a defaulted exposure under the RBI Prudential Framework — it may reschedule or restructure the debt, change ownership, or arrange a sale. It is treated as implemented only when the agreed conditions and documentation are in place, after which the account is watched through a satisfactory-performance period before any asset-classification upgrade; delay attracts additional provisioning. DoR rulebook →
All-in-cost ceiling
The cap RBI places on the total cost an Indian borrower may pay on an External Commercial Borrowing (ECB) — it bundles interest, fees and other charges (but not statutory items) into one benchmark-linked ceiling expressed as a spread over a reference rate. It keeps overseas borrowing costs within prudential limits and is set under the FEMA / ECB framework. FEMA rulebook →
Banker's lien
A banker's right to retain a customer's securities, instruments or other property that lawfully come into the bank's hands in the ordinary course of banking, until the customer's outstanding dues to the bank are cleared. It is treated as an implied pledge, meaning the bank can ultimately realise the retained property to recover what it is owed, not merely hold it. It is a general lien covering the overall balance rather than a charge tied to one transaction, and bankers rely on it as a built-in security distinct from any specific collateral taken at sanction. Right of set-off →
Right of set-off
A bank's right to combine two accounts of the same customer and apply a credit balance in one against a debit balance in another, so that only the net amount is owed either way. It can be exercised when the debts are due and in the same right (for example, adjusting a savings balance against an overdue loan of the same borrower), subject to any agreement and to notice and regulatory conduct norms. Bankers treat it as a recovery tool that works alongside the banker's lien, and apply it carefully because wrongly combining accounts can expose the bank to a claim. Banker's lien →
Fixed and floating charge
Two ways a bank takes security over a borrower's assets. A fixed charge attaches to a specific, identifiable asset — such as land or machinery — which the borrower cannot freely sell without the bank's consent. A floating charge hovers over a changing pool of assets, typically stock and receivables, leaving the borrower free to deal with them in the ordinary course until the charge 'crystallises' on default, when it fixes onto whatever assets are then in the pool. Bankers commonly combine a fixed charge on long-term assets with a floating charge on current assets, and the distinction affects priority of recovery if the borrower fails. Hypothecation →
Memorandum of Deposit of Title Deeds
A short written record evidencing that a borrower has deposited the title documents of an immovable property with the bank with the intention of creating security — the mechanism behind an equitable (deposit-of-title-deeds) mortgage. The mortgage itself arises from the act of depositing the deeds with intent to secure the loan, so the memorandum records the fact and terms rather than creating the charge by itself. Bankers use it because it is quicker and cheaper than a registered mortgage, while being careful that the deposit happens in a notified place and that the documentation does not inadvertently turn it into a compulsorily registrable instrument. Equitable mortgage →
Second charge
A security interest a lender takes over an asset that already carries a prior (first) charge in favour of another lender, ranking the second lender behind the first for recovery from that asset. On enforcement the first charge-holder is paid in full before the second sees any proceeds, so a second charge is weaker and is usually taken only with the first lender's no-objection and a clear view of the residual value. Bankers use it to lend against the equity left in an already-charged asset, and price it for the higher risk that ranking behind implies. Fixed and floating charge →
Multiple banking arrangement
An arrangement where a borrower takes credit facilities from several banks at the same time, but each bank lends independently under its own sanction, documentation and security charge rather than through one common agreement. Unlike a consortium there is no lead bank, no shared appraisal and no formal pooling of information, so each lender appraises and monitors the account on its own. To limit the risk of over-lending against the same assets, RBI requires banks to exchange information and obtain declarations of the borrower’s existing facilities. Bankers weigh it against consortium lending, which centralises appraisal and security but is slower to set up. Consortium lending →
Standby Letter of Credit (SBLC)
A letter of credit that works as a guarantee rather than a payment instrument: the issuing bank pays the beneficiary only if the bank’s customer fails to perform or pay under the underlying contract. Where an ordinary documentary LC is expected to be drawn in the normal course of a trade transaction, an SBLC is meant to stay unused — a fallback invoked only on default. Bankers treat it as a non-fund-based exposure that carries the same credit risk as a guarantee, and assess it on the customer’s ability to perform the underlying obligation. Letter of credit →
Trust receipt
A document a bank takes from an importer when it releases goods, or the title documents, bought under a letter of credit before the importer has paid the bank. The importer acknowledges holding the goods in trust for the bank, agrees to sell them, and undertakes to remit the sale proceeds to settle the bank’s claim. It lets the buyer obtain and sell stock while the bank retains a claim over the goods and their proceeds, bridging the gap between the LC payment and the buyer’s own collection. Bankers use it to extend post-import finance without losing security over the underlying goods. Letter of credit →
Bridge loan
A short-term loan that bridges a temporary funding gap until a larger or more permanent source of finance comes through — for example, a borrower covering costs until a planned term loan, sale proceeds or equity raise closes. It is priced for its short tenor and higher risk, is usually repaid in one go when the anticipated funds arrive, and is prudently sanctioned only when that take-out source is reasonably certain. Bankers treat it as interim accommodation, not a substitute for the underlying long-term facility. Term loan →
Bullet repayment
A repayment structure where the entire principal falls due in a single lump sum at the end of the loan tenor instead of being amortised in instalments along the way. Interest may still be serviced periodically, but the principal ‘bullet’ is paid only at maturity. It suits borrowers expecting a large inflow later — on a project’s completion or an investment’s maturity — but it concentrates credit risk at the end, so bankers pair it with a clearly assessed source of repayment. It is the opposite of the level-EMI amortisation most retail loans use. Amortisation schedule →
Takeout finance
An arrangement where one lender’s loan is later ‘taken out’ — refinanced — by another institution under a pre-agreed commitment, commonly used for long-gestation infrastructure projects. A bank funds the project in its early years and a longer-tenor lender contracts upfront to buy out the exposure on a set date, freeing the original bank’s capital and matching the project’s long life to long-term funds. It lets banks support large projects without carrying an asset-liability mismatch for the full tenor. Term loan →
Auto-sweep / Sweep-in fixed deposit (MOD)
A savings or current account feature that automatically moves money above a threshold into a linked fixed deposit (often called a Multi-Option Deposit or MOD), and pulls it back when the account needs funds to honour a withdrawal or cheque. The customer earns the higher term-deposit rate on idle balances while keeping instant liquidity, because the bank breaks only as much of the deposit as is needed, usually on a last-in-first-out basis. It is a retail convenience product banks offer on their own terms rather than an RBI mandate, but it sits on top of the same deposit and interest-rate rules — a high-search, customer-facing concept that product pages rarely explain plainly. CASA →
Floating provisions
Provisions a bank sets aside over and above the specific and general provisions required against identified bad loans, built up in good years as a counter-cyclical cushion. Because they are not tied to any single non-performing account, floating provisions can — only with the conditions and disclosures the RBI specifies — be drawn down to absorb losses in stressed periods, smoothing the impact of the credit cycle on the profit-and-loss account. They are a prudential, banker-facing concept distinct from the routine provisioning that drives the provision coverage ratio, and they interact with the move toward expected-credit-loss provisioning. Provision coverage ratio (PCR) →
Repo rate
The interest rate at which the RBI lends overnight funds to banks against government securities. It is the central policy lever: raising it makes credit costlier to cool inflation, cutting it supports growth. Repo rate timeline → · Related rulebook: Financial Markets Regulation →
CRAR (Capital adequacy)
Capital to Risk-weighted Assets Ratio — a bank's capital expressed as a percentage of its risk-weighted exposures. It measures the cushion available to absorb losses; Indian banks must hold a minimum of 11.5% including the capital conservation buffer. Bank health scores → · Related rulebook: Department of Regulation →
Gross NPA (GNPA)
The total value of loans a bank has classified as non-performing — broadly, where the borrower has not paid interest or principal for 90 days or more — as a percentage of gross advances. NPA tracker → · Related rulebook: Department of Regulation →
Net NPA (NNPA)
Gross NPAs after deducting the provisions a bank has already set aside against them. It shows the un-provided stress still sitting on the balance sheet, and is always lower than gross NPA. NPA tracker → · Related rulebook: Department of Regulation →
Provision Coverage Ratio (PCR)
The share of gross NPAs already covered by provisions. A higher PCR means a smaller part of the bad-loan book can hurt future profits if it has to be written off. NPA tracker → · Related rulebook: Department of Regulation →
Slippage
Fresh additions to non-performing assets in a period — loans that were standard at the start and turned bad. Bankers watch slippage alongside the NPA ratio because it shows the direction of asset quality, not just the level. NPA tracker → · Related rulebook: Supervision →
Credit-deposit ratio (CD ratio)
Outstanding bank credit as a percentage of total deposits. A high ratio means banks are lending out most of the money they take in, which tightens funding and intensifies competition for deposits. Credit & deposit growth → · Related rulebook: Financial Inclusion / Priority Sector →
CASA
Current Account and Savings Account deposits — the low-cost, often non-interest or low-interest balances banks prize because they reduce the average cost of funds and lift net interest margins. Credit & deposit growth → · Related rulebook: Department of Regulation →
LCR (Liquidity Coverage Ratio)
The stock of high-quality liquid assets a bank must hold to cover net cash outflows over a 30-day stress scenario. It must stay above 100%, ensuring banks can survive a short, sharp liquidity shock. Bank health scores → · Related rulebook: Department of Regulation →
NSFR (Net Stable Funding Ratio)
Net Stable Funding Ratio requires a bank to back its longer-term assets with sufficiently stable funding over a one-year horizon. Calculated as available stable funding divided by required stable funding, it must stay at or above 100% and complements the LCR by guarding against funding risk over the medium term, not just a 30-day shock. Bank health scores → · Related rulebook: Department of Regulation →
Prompt Corrective Action (PCA)
The RBI supervisory framework that places a bank under escalating restrictions — on dividends, branch expansion, lending or management — when key metrics such as capital adequacy, asset quality (net NPA) or leverage breach defined risk thresholds. It is a structured way to nurse a weak bank back to health before it fails. Bank health scores → · Related rulebook: Supervision →
Priority Sector Lending (PSL)
RBI rules requiring banks to direct a set share of credit to segments such as agriculture, micro and small enterprises, and weaker sections, so that credit reaches productive but under-served parts of the economy. PSL rules → · Related rulebook: Financial Inclusion / Priority Sector →
KYC / AML
Know Your Customer and Anti-Money-Laundering obligations — the identity-verification, monitoring and reporting duties banks must follow to prevent their systems being used for money laundering or terror financing. KYC / AML rules → · Related rulebook: Department of Regulation →
Master Direction
A consolidated, standing RBI rulebook on a subject that pulls together the relevant instructions in one place and is updated as the rules change — the authoritative reference banks turn to first. Master Direction crosswalk →
Key Facts Statement (KFS)
A short, standardised summary a lender must give a borrower up front, setting out the all-in interest rate, fees, charges and key terms so the true cost of a loan is clear before signing. Home-loan rules → · Related rulebook: Department of Regulation →
External Benchmark Lending Rate (EBLR)
A framework requiring most floating-rate retail and small-business loans to be priced off an external benchmark (such as the repo rate) plus a transparent spread, so policy-rate changes pass through to borrowers faster. Home-loan rules → · Related rulebook: Department of Regulation →
Scheduled Commercial Bank (SCB)
A bank listed in the Second Schedule of the RBI Act that meets defined capital and conduct conditions. Most published banking-system statistics — credit, deposits, NPAs — are aggregates for SCBs. Bank health scores → · Related rulebook: Department of Regulation →
Co-operative Bank
A bank registered as a co-operative society and licensed by the RBI to do banking. Urban co-operative banks (UCBs) and rural co-operatives are dual-regulated by the RBI and the Registrar of Co-operative Societies, and are among the most frequent recipients of RBI monetary penalties. Co-operative bank rules →
Cash Reserve Ratio (CRR)
The share of a bank's deposits it must keep as cash with the RBI, earning no interest. Raising the CRR drains liquidity from the banking system; cutting it releases funds banks can lend. Monetary policy timeline → · Related rulebook: Financial Markets Regulation →
Statutory Liquidity Ratio (SLR)
The minimum share of deposits a bank must hold in safe, liquid assets such as government securities, gold or cash before lending the rest. It safeguards solvency and channels funds to government borrowing. Deposit & rate rules → · Related rulebook: Financial Markets Regulation →
MCLR
Marginal Cost of Funds based Lending Rate — the internal benchmark below which a bank generally cannot price a loan. It links lending rates to a bank's own marginal funding cost and is being steadily replaced by external benchmarks for retail loans. Home-loan rules → · Related rulebook: Department of Regulation →
Net Interest Margin (NIM)
The gap between the interest a bank earns on loans and investments and the interest it pays on deposits and borrowings, as a percentage of its earning assets. It is the core measure of a bank's lending profitability. Bank health scores → · Related rulebook: Department of Regulation →
Return on Assets (RoA)
A bank's net profit expressed as a percentage of its total assets — how much profit each rupee of assets generates. RoA above 1% is generally read as a healthy, well-run bank. Bank health scores → · Related rulebook: Supervision →
Special Mention Account (SMA)
An early-warning category for loans that are overdue but not yet non-performing: SMA-0 (up to 30 days), SMA-1 (31-60 days) and SMA-2 (61-90 days). It flags stress before an account slips into NPA. NPA tracker → · Related rulebook: Department of Regulation →
Risk-Weighted Assets (RWA)
A bank's exposures scaled by how risky each one is, so that a safe government bond carries far less weight than an unsecured loan. Capital ratios are measured against RWA, not raw assets. Capital & Basel rules → · Related rulebook: Department of Regulation →
Tier 1 & Tier 2 capital
The two layers of regulatory capital. Tier 1 is the core, loss-absorbing capital (mainly equity and reserves); Tier 2 is supplementary capital such as certain subordinated debt. Together they make up a bank's total capital base. Capital & Basel rules → · Related rulebook: Department of Regulation →
NBFC
Non-Banking Financial Company — a lender that provides credit and other financial services but cannot accept demand deposits or issue cheques. NBFCs are regulated by the RBI under a scale-based framework. NBFC rules → · Related rulebook: NBFC Regulation →
Wilful defaulter
A borrower who can repay but deliberately does not, or who diverts or siphons off borrowed funds. RBI rules bar wilful defaulters from fresh bank finance and require lenders to report and publish their names. NPA tracker → · Related rulebook: Department of Regulation →
Deposit insurance (DICGC)
Cover provided by the Deposit Insurance and Credit Guarantee Corporation, an RBI subsidiary, that protects each depositor up to Rs 5 lakh per bank if the bank fails. It underpins public trust in the deposit system. Deposit & rate rules → · Related rulebook: Consumer Protection →
UPI
Unified Payments Interface — the real-time, mobile-first payment system that lets users move money instantly between bank accounts using a virtual ID, without sharing account details. It is the backbone of India's retail digital payments. UPI rules → · Related rulebook: Payment & Settlement Systems →
Reverse repo rate
The interest rate at which the RBI absorbs surplus liquidity from banks by borrowing their excess funds against government securities. It sits below the repo rate and marks the lower bound of the policy-rate corridor. Repo rate timeline →
Standing Deposit Facility (SDF)
A liquidity-absorption tool introduced in 2022 that lets banks park surplus funds with the RBI without receiving government securities as collateral. The SDF rate now forms the floor of the monetary-policy corridor, 25 basis points below the repo rate. Monetary policy timeline →
Ways and Means Advances (WMA)
Temporary, repayable advances the RBI extends to the central and state governments to bridge short-term mismatches between their receipts and payments. They are a cash-management facility, not a source of long-term financing. Monetary policy timeline →
SARFAESI
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — it lets secured lenders enforce collateral and recover dues from defaulting borrowers without going through the courts, including by taking possession of and selling the secured asset. NPA tracker →
Expected Credit Loss (ECL)
A forward-looking provisioning approach under which banks set aside provisions based on the credit losses they expect over a loan's life, rather than only after default. RBI is moving the banking system towards an ECL-based framework from the current incurred-loss model. NPA tracker →
CRILC
The Central Repository of Information on Large Credits — an RBI database in which lenders report borrowers with aggregate exposure of Rs 5 crore and above, so that emerging stress on large accounts is visible across the system early. NPA tracker →
NEFT / RTGS
The RBI's two core interbank fund-transfer rails. RTGS (Real Time Gross Settlement) settles large-value transfers individually and instantly; NEFT (National Electronic Funds Transfer) settles in near-real-time batches. Both run round the clock and underpin India's electronic payments. Digital payment rules →
IRAC norms
Income Recognition and Asset Classification norms — the RBI rules that decide when a bank must stop booking interest income on a loan and classify it as standard, sub-standard, doubtful or loss based on how long it has stayed overdue. They are the backbone of NPA recognition and provisioning. NPA tracker → · Related rulebook: Department of Regulation →
Loan restructuring
A change in a loan’s terms — a longer tenor, lower rate, or a moratorium — granted because the borrower is in financial difficulty. Restructured standard accounts attract higher provisions and are watched closely as potential future NPAs. NPA tracker → · Related rulebook: Department of Regulation →
Co-lending
An RBI-enabled model in which a bank and an NBFC jointly fund a loan to a priority-sector borrower and share the risk and reward in an agreed ratio, combining the bank’s low-cost funds with the NBFC’s last-mile reach. NBFC rules → · Related rulebook: Financial Inclusion / Priority Sector →
FLDG
First Loss Default Guarantee — an arrangement in digital lending where a third party (often a fintech) compensates a lender for a capped slice of early loan losses. RBI’s 2023 guidelines formalised it, renamed it the Default Loss Guarantee (DLG) and capped the cover at 5% of the loan portfolio. NBFC rules → · Related rulebook: NBFC Regulation →
Default Loss Guarantee (DLG)
The RBI’s formal term, set out in its 2023 digital-lending guidelines, for what the market called FLDG. A regulated lender may take a DLG from a lending service provider covering up to 5% of the underlying loan portfolio, while still recognising NPAs on the full book. NBFC rules → · Related rulebook: NBFC Regulation →
Resolution Framework 2.0 (RF-2.0)
The RBI’s May 2021 COVID-19 resolution window that let banks and NBFCs restructure standard loans of individuals, small businesses and MSMEs stressed by the pandemic — subject to an aggregate exposure cap and without an asset-classification downgrade, provided the restructuring was invoked and implemented within set timelines. It extended the August 2020 Resolution Framework 1.0 and required additional provisioning on accounts restructured under it. NPA tracker → · Related rulebook: Department of Regulation →
Lending Service Provider (LSP)
An agent engaged by a regulated lender under the RBI digital-lending guidelines to perform parts of the lending process — customer sourcing, onboarding, servicing or collection — on the lender’s behalf. The regulated entity remains responsible for compliance and customer protection, and any Default Loss Guarantee taken from an LSP is capped at 5% of the underlying loan portfolio. NBFC rules → · Related rulebook: NBFC Regulation →
Self-Regulatory Organisation (SRO)
An industry body recognised by the RBI to set and enforce baseline conduct and governance standards among its members — for example among NBFCs or fintech firms — bridging formal regulation and day-to-day market practice. Members commit to a code of conduct the SRO monitors, while the RBI retains ultimate supervisory authority. NBFC rules → · Related rulebook: NBFC Regulation →
Internal Capital Adequacy Assessment Process (ICAAP)
A bank’s own assessment, required under Basel Pillar 2, of whether its capital is sufficient to cover all material risks — including those not fully captured by the standard Pillar 1 minimums, such as concentration risk, interest-rate risk in the banking book and liquidity risk. The board-approved ICAAP is examined by the RBI under its Supervisory Review and Evaluation Process (SREP), which can require a bank to hold capital above the regulatory floor. Capital / Basel rules → · Related rulebook: Department of Regulation →
Risk-Based Internal Audit (RBIA)
An internal-audit approach the RBI requires of banks and large NBFCs that concentrates audit effort on the units and activities carrying the most risk, rather than auditing every area uniformly. It ties the internal-audit plan to the entity’s own risk assessment and reports independently to the audit committee of the board. NBFC rules → · Related rulebook: Supervision →
Net Interest Income (NII)
The difference between the interest a bank earns on its loans and investments and the interest it pays on deposits and borrowings. NII is the core of a bank’s operating revenue; expressed as a percentage of average interest-earning assets it becomes the net interest margin (NIM). Bank health scores → · Related rulebook: Department of Regulation →
IBC (Insolvency & Bankruptcy Code)
The Insolvency and Bankruptcy Code, 2016 — India’s unified law for time-bound resolution of defaulting companies. When recovery efforts fail, lenders can refer a borrower to the National Company Law Tribunal, where a resolution professional runs a process (target 330 days) to either revive the business or liquidate it. It reshaped how banks recover large stressed loans. NPA tracker → · Related rulebook: Department of Regulation →
ARC (Asset Reconstruction Company)
An RBI-registered company that buys non-performing loans from banks at a discount and works to recover or restructure them, clearing bad assets off the bank’s balance sheet. ARCs typically pay the selling lender partly in cash and partly through security receipts whose value depends on eventual recovery. NPA tracker → · Related rulebook: NBFC Regulation →
NACH (National Automated Clearing House)
The NPCI-operated bulk electronic payment system for high-volume, repetitive credits and debits — salaries, pensions, dividends, EMI auto-debits and subscription mandates. It is the rail behind standing-instruction recurring payments and is overseen by the RBI under the payment-systems framework. Digital payment rules → · Related rulebook: Payment & Settlement Systems →
CBS (Core Banking Solution)
The centralised software platform that lets all of a bank’s branches work on a single, real-time customer database, so an account can be accessed and updated from anywhere (‘anywhere banking’). CBS is the foundation on which digital channels, payments and supervisory reporting run. Bank health scores → · Related rulebook: Supervision →
CKYC (Central KYC Records Registry)
A central repository (operated by CERSAI) that stores a customer’s verified KYC records under a 14-digit CKYC identifier. Once registered, a customer can open accounts across banks and financial firms without repeating full KYC, as institutions fetch the records from the registry. KYC / AML rules → · Related rulebook: Department of Regulation →
DRT (Debts Recovery Tribunal)
A specialised tribunal set up under the RDDBFI Act, 1993 to fast-track adjudication and recovery of dues owed to banks and financial institutions above ₹20 lakh. Lenders file a recovery application; appeals lie with the Debts Recovery Appellate Tribunal (DRAT). It is one of the main debt-recovery channels alongside SARFAESI and the IBC. NPA tracker → · Related rulebook: Department of Regulation →
One-Time Settlement (OTS)
A negotiated lump-sum settlement in which a lender accepts less than the full dues to close a defaulted loan, writing off the balance as a sacrifice. RBI’s board-approved compromise-settlement framework lets banks do OTS — even for wilful defaulters subject to conditions — to clear stressed assets faster. NPA tracker → · Related rulebook: Department of Regulation →
LRS (Liberalised Remittance Scheme)
The RBI scheme that lets a resident individual remit up to USD 250,000 per financial year abroad for permitted current- and capital-account purposes — travel, education, medical care, investment and gifts — without prior RBI approval. Authorised-dealer banks process and report the remittances under FEMA. FEMA rulebook → · Related rulebook: Foreign Exchange / FEMA →
NPCI (National Payments Corporation of India)
The not-for-profit umbrella organisation, promoted by banks under RBI and IBA guidance, that builds and runs India’s retail payment systems — UPI, IMPS, NACH, RuPay and FASTag. It operates under the RBI’s authorisation through the Payment and Settlement Systems Act, 2007. Digital payment rules → · Related rulebook: Payment & Settlement Systems →
CERSAI
The Central Registry of Securitisation Asset Reconstruction and Security Interest of India — a central online registry set up under the SARFAESI Act where lenders record charges (security interests) created on assets against loans. It lets banks check whether an asset is already pledged elsewhere, curbing multiple-financing fraud, and it also hosts the CKYC registry. NPA tracker → · Related rulebook: Department of Regulation →
PSL Sub-targets (Priority Sector Lending)
Within a commercial bank’s overall 40% priority-sector-lending target, RBI sets segment sub-targets — broadly 18% of adjusted net bank credit to agriculture (with a carve-out for small and marginal farmers), 7.5% to micro enterprises and 12% to weaker sections. Banks that fall short contribute the shortfall to the Rural Infrastructure Development Fund and similar funds. Priority-sector rules →
RAROC (Risk-Adjusted Return on Capital)
A profitability measure that divides an exposure’s expected return by the economic capital it consumes, where capital is sized to the risk taken. By charging riskier business more capital, RAROC lets a bank compare units on a like-for-like, risk-adjusted basis and price loans to clear a hurdle rate. Bank health scores →
CCB (Capital Conservation Buffer)
An extra layer of common-equity capital — 2.5% of risk-weighted assets in India — that banks build up in good times on top of the minimum capital ratio, giving an 11.5% effective CRAR floor. It can be drawn down to absorb losses in stress, but a bank operating inside the buffer faces automatic limits on dividends and discretionary payouts. Bank health scores →
Large Exposures Framework (LEF)
RBI’s framework capping how much a bank can lend to one counterparty or connected group, to limit concentration risk. A bank’s total exposure to a single counterparty is generally capped at 20% of its eligible (Tier 1) capital, and 25% for a group of connected counterparties, with tighter limits for global systemically important banks. DoR rulebook →
HQLA & SLR (High-Quality Liquid Assets)
High-Quality Liquid Assets are unencumbered, easily-sellable assets — mainly cash, central-bank reserves and government securities — that a bank holds to survive a 30-day stress under the Liquidity Coverage Ratio. They overlap with the Statutory Liquidity Ratio (SLR), the slice of deposits banks must park in such safe assets, since SLR securities can also count toward the LCR buffer. Bank health scores →
Marginal Standing Facility (MSF)
An emergency overnight window through which banks can borrow from the RBI over and above the repo, pledging government securities and, if needed, dipping into their SLR holdings. It is priced above the repo rate (usually repo + 0.25%) and forms the ceiling of the RBI liquidity corridor — the most a bank should ever have to pay for overnight funds. Repo rate timeline → · Related rulebook: Financial Markets Regulation →
Liquidity Adjustment Facility (LAF)
The RBI’s day-to-day toolkit for managing system liquidity through repo operations that inject funds and reverse-repo / Standing Deposit Facility operations that absorb them. By moving liquidity in and out, the LAF keeps the overnight money-market rate inside a corridor bounded by the SDF at the floor and the MSF at the ceiling, with the repo rate in the middle. Repo rate timeline → · Related rulebook: Financial Markets Regulation →
Net Demand and Time Liabilities (NDTL)
A bank’s total deposit base — demand liabilities such as current and savings balances plus time liabilities such as fixed deposits, net of inter-bank items — on which the Cash Reserve Ratio and Statutory Liquidity Ratio are calculated. A higher NDTL therefore mechanically raises the rupee amount a bank must keep as CRR with the RBI and as SLR in approved securities. Deposit & credit growth → · Related rulebook: Financial Markets Regulation →
Domestic Systemically Important Bank (D-SIB)
A bank judged so large and interconnected that its failure would threaten the wider financial system — informally ‘too big to fail’. The RBI places such banks in buckets that each carry an extra Common Equity Tier 1 capital surcharge on top of normal requirements; SBI, HDFC Bank and ICICI Bank are currently designated D-SIBs. Bank health scores → · Related rulebook: Department of Regulation →
Banking Ombudsman (RB-IOS)
The RBI’s free, independent grievance-redress mechanism for customers of banks, NBFCs and payment operators, run under the Reserve Bank – Integrated Ombudsman Scheme 2021 on a ‘One Nation, One Ombudsman’ basis. A customer who is unsatisfied with a regulated entity’s response can escalate the complaint to the Ombudsman at no cost rather than going to court. RBI penalty tracker → · Related rulebook: Consumer Protection →
CRAR buffers (Capital Conservation, Countercyclical, D-SIB)
The layers of extra capital the RBI stacks on top of a bank’s 9% minimum CRAR. The 2.5% Capital Conservation Buffer lifts the effective floor to 11.5%; a Countercyclical Capital Buffer of up to 2.5% can be switched on when credit growth overheats; and systemically important banks carry an added D-SIB surcharge. Operating inside these buffers triggers automatic curbs on dividends and discretionary payouts rather than an outright breach. Bank health scores → · Related rulebook: Department of Regulation →
CCyB (Countercyclical Capital Buffer)
A macro-prudential capital add-on of 0 to 2.5% of risk-weighted assets that the RBI can activate when system-wide credit growth runs ahead of trend, forcing banks to build extra common-equity capital in booms that can be released in downturns to keep credit flowing. In India the CCyB framework is in place but has so far been kept at zero. Bank health scores → · Related rulebook: Department of Regulation →
ALM (Asset-Liability Management)
The discipline of managing the mismatch between the maturity and repricing of a bank’s assets (loans, investments) and its liabilities (deposits, borrowings) so that liquidity and interest-rate risk stay within board-approved limits. Banks run ALM through an Asset-Liability Committee (ALCO) and report structural-liquidity and interest-rate-sensitivity statements to the RBI. Bank health scores → · Related rulebook: Department of Regulation →
CGTMSE (Credit Guarantee Fund for Micro & Small Enterprises)
A government-backed trust that guarantees a large share of the collateral-free loans banks and NBFCs extend to micro and small enterprises, so lenders can fund MSMEs without insisting on property security. If a covered borrower defaults, the trust reimburses the lender up to the guaranteed percentage, sharing the credit risk and widening formal credit access for small businesses. Priority-sector rules → · Related rulebook: Financial Inclusion & Priority Sector →
TReDS (Trade Receivables Discounting System)
An RBI-regulated electronic platform on which micro, small and medium enterprises auction their unpaid invoices on large buyers to banks and other financiers, converting receivables into immediate cash. Multiple financiers bid to discount each invoice, giving MSMEs faster, competitively-priced working capital. TReDS is authorised under the Payment and Settlement Systems Act. Priority-sector rules → · Related rulebook: Financial Inclusion & Priority Sector →
PSLC (Priority Sector Lending Certificates)
Tradable certificates that let a bank which has lent more than its Priority Sector Lending (PSL) target sell the surplus to a bank that has fallen short, so the buyer meets its obligation without originating the underlying loan. The loan and its credit risk stay with the originating bank; only the priority-sector credit is transferred. RBI runs four PSLC categories — General, Agriculture, Small & Marginal Farmers and Micro Enterprises — traded on the e-Kuber platform. Priority-sector rules → · Related rulebook: Financial Inclusion & Priority Sector →
Leverage Ratio (Basel III)
A simple, non-risk-based backstop to the capital ratios: Tier 1 capital divided by a bank’s total on- and off-balance-sheet exposure, regardless of risk weights. It stops a bank loading up on assets that look safe under Risk-Weighted Assets but still build up raw leverage. RBI sets a minimum Leverage Ratio of 4% for Domestic Systemically Important Banks (D-SIBs) and 3.5% for other banks. Capital & Basel rules → · Related rulebook: Department of Regulation →
Bank Rate
The rate at which the RBI stands ready to buy or rediscount eligible bills and provide long-term funds to banks — historically the RBI’s signalling rate. It is now aligned with the Marginal Standing Facility (MSF) rate, sitting 25 basis points above the repo rate, and is mainly used as the reference for penal interest on shortfalls in CRR and SLR balances rather than as an active policy lever. Monetary policy timeline → · Related rulebook: Financial Markets Regulation →
IRACP (Provisioning norms)
Income Recognition, Asset Classification and Provisioning norms — the provisioning side of the IRAC framework. Once a loan is classified, RBI prescribes minimum provisions a bank must set aside: broadly 0.25–1% on standard assets by sector, 15% on sub-standard (25% if unsecured), 25–100% on doubtful assets rising with age, and 100% on loss assets. These floors decide how much of a bad loan hits profit before any recovery. NPA tracker → · Related rulebook: Department of Regulation →
OMO (Open Market Operations)
The RBI’s purchase or sale of government securities in the open market to manage durable system liquidity. Buying bonds injects rupees and is expansionary; selling them drains liquidity and is contractionary. Unlike the overnight repo and Standing Deposit Facility (SDF) used for day-to-day tuning, OMOs adjust liquidity for longer periods and can also steady the government-bond yield curve. Monetary policy timeline → · Related rulebook: Financial Markets Regulation →
Base Rate
The minimum lending rate below which a bank could not price most loans under the framework that ran from 2010 until MCLR replaced it for new loans in 2016. It succeeded the older Benchmark Prime Lending Rate and was itself superseded by MCLR and then the External Benchmark Lending Rate; some legacy loans are still linked to it. Monetary policy timeline → · Related rulebook: Department of Regulation →
Regional Rural Bank (RRB)
A government-sponsored bank set up under the RRB Act, 1976 and jointly owned by the centre, a sponsor bank and the state government, mandated to serve rural and semi-urban areas with credit for agriculture, small enterprises and weaker sections. RRBs are a key channel for priority-sector and financial-inclusion lending and are being consolidated state-by-state. Deposit & credit growth → · Related rulebook: Financial Inclusion & Priority Sector →
Local Area Bank (LAB)
A small, privately-owned bank licensed by the RBI under its 1996 scheme to operate within two or three contiguous districts, mobilising local rural and semi-urban savings and lending them back into that same area. Only a few were ever licensed and the niche has largely been overtaken by Small Finance Banks, but the LAB remains a distinct RBI class of bank. Deposit & credit growth → · Related rulebook: Financial Inclusion & Priority Sector →
Small Finance Bank (SFB)
A differentiated bank licensed by the RBI to further financial inclusion by taking deposits and lending mainly to small borrowers — micro enterprises, small farmers and the unorganised sector — with at least 75% of credit to priority sectors and a large share of small-ticket loans. SFBs face the full prudential framework (CRAR, CRR, SLR) like commercial banks. Bank health scores → · Related rulebook: Department of Regulation →
Differentiated bank
An RBI category for niche, restricted-scope banks that serve a specific segment or function rather than offering the full range of universal banking. Under the RBI’s 2014 differentiated-licensing framework the two licensed types are the Small Finance Bank (a deposit-taking lender focused on small borrowers and financial inclusion) and the Payments Bank (which takes capped deposits and offers payments but cannot lend); the earlier Local Area Bank scheme and the Regional Rural Banks are also segment-focused lenders rather than full universal banks. The term groups these specialised bank types against ordinary scheduled commercial banks. Bank health scores →
Universal bank
A bank that offers the full range of banking and financial services — deposits, lending, trade finance, treasury, foreign exchange and, through subsidiaries, insurance and securities — to all customer segments, without the activity restrictions placed on a differentiated bank. India’s scheduled commercial banks (public-sector, private-sector and foreign banks) operate as universal banks; the term is used to contrast them with niche, restricted-scope models such as Small Finance Banks and Payments Banks. Bank health scores →
Payments Bank
A differentiated bank licensed by the RBI that can accept deposits up to a capped balance per customer and offer payments and remittance services, but cannot lend or issue credit cards. It must invest its deposits in safe government securities and bank balances, making it a low-risk vehicle for last-mile payments and inclusion. Bank health scores → · Related rulebook: Department of Regulation →
Account Aggregator (AA)
An RBI-regulated NBFC-AA that, with a customer’s explicit consent, securely retrieves and shares their financial data across banks, NBFCs and other regulated entities through a standardised consent framework. It acts as a neutral data-pipe — it cannot store, use or see the data — and underpins consent-driven, paperless lending and personal-finance services. NBFC rules → · Related rulebook: Department of Regulation →
Credit bureau / CIBIL
A Credit Information Company (CIC) licensed by the RBI under the Credit Information Companies (Regulation) Act, 2005 that collects borrowers’ loan and repayment records from lenders and issues credit scores and reports. CIBIL (TransUnion CIBIL) is the best-known of India’s four RBI-licensed CICs, alongside Experian, Equifax and CRIF High Mark; lenders must report data to all of them and update records within prescribed timelines. Personal loan rules →
NACH mandate (e-mandate)
A standing electronic instruction a customer gives so a lender or biller can auto-debit recurring payments — EMIs, SIPs, insurance premiums, utility bills — from their bank account through the NACH system. Registered once (on paper or via Aadhaar/net-banking e-mandate), it removes the need to authorise each instalment; RBI rules cap and govern how mandates are set up, amended and cancelled. NACH →
Video KYC (V-CIP)
Video-based Customer Identification Process — an RBI-permitted method of completing KYC remotely through a live, consent-based video call with an authorised official, using face match and online document/Aadhaar verification. Introduced in the RBI’s KYC Master Direction, it lets banks and NBFCs onboard customers digitally without an in-person branch visit. KYC / AML rules →
Green deposits
Interest-bearing deposits whose proceeds banks and NBFCs commit to allocate to eligible green projects — renewable energy, clean transport, energy efficiency and similar — under the RBI’s Framework for Acceptance of Green Deposits, effective 1 June 2023. The framework requires a board-approved policy, third-party impact assessment and annual disclosure of how the money was used. Deposit & rate rules →
Investment classification (HTM / AFS / FVTPL)
How a bank books its investment portfolio under the RBI's revised framework: Held-to-Maturity (HTM) for assets it intends to hold to maturity, Available-for-Sale (AFS) for those it may sell, and Fair Value Through Profit & Loss (FVTPL) including held-for-trading. The classification decides whether price changes hit reserves or the profit-and-loss account, so it shapes reported earnings and capital. Capital & Basel rules → · Related rulebook: Department of Regulation →
Currency Chest
A secure store of banknotes and coins that a bank holds on behalf of the RBI to feed cash to branches and ATMs in its area. Balances in a currency chest count as RBI cash, so deposits into and withdrawals from it move the bank's CRR position and underpin clean-note distribution. Currency Management rulebook → · Related rulebook: Currency Management →
Unclaimed Deposits & DEAF
Balances lying in accounts untouched for ten years or more are transferred by banks to the RBI's Depositor Education and Awareness Fund (DEAF). The depositor keeps the right to reclaim the money with interest at any time; the fund is used for depositor-awareness work in the meantime. RBI's outreach drives (such as the 100 Days 100 Pays campaign) push banks to return these balances. Deposit & rate rules → · Related rulebook: Department of Regulation →
Scale-Based Regulation (NBFC SBR)
The RBI framework that sorts non-banking financial companies into four layers — Base, Middle, Upper and Top — by size, activity and perceived risk, and applies progressively tighter capital, governance and disclosure norms as an NBFC moves up the layers. It replaced the older one-size-fits-all approach so that the largest NBFCs face near-bank-grade oversight. NBFC rules → · Related rulebook: NBFC Regulation →
Card Tokenisation
An RBI security measure that replaces a customer's actual card number with a unique, device-specific code (a token) for online and saved-card payments, so merchants never store the real card details. It cuts the damage from data breaches while letting one-click and recurring card payments continue smoothly. Digital payment rules → · Related rulebook: Payment & Settlement Systems →
Government Securities (G-Sec)
Tradable debt instruments issued by the central or state governments — Treasury Bills (under a year) and dated bonds (longer tenors) — carrying sovereign, near zero credit risk. They are the collateral the RBI lends against under the <a href="/glossary/#repo-rate">repo rate</a>, the bulk of what banks hold to meet the <a href="/glossary/#slr">SLR</a>, and the securities the RBI buys or sells in <a href="/glossary/#omo">open market operations</a> to manage liquidity. Monetary policy timeline →
Basic Savings Bank Deposit Account (BSBDA)
A no-frills, zero minimum-balance savings account every bank must offer to further financial inclusion. It gives basic services — deposits, withdrawals, an ATM/debit card and electronic transfers — free of charge, and can be opened with simplified <a href="/glossary/#kyc-aml">KYC</a>, including <a href="/glossary/#video-kyc">video-KYC</a>, so that customers without full documentation are not shut out of the banking system. KYC / AML rules →
Nostro & Vostro Accounts
The mirror-image accounts banks hold with each other to settle cross-border payments. A nostro account (“our account with you”) is the account a domestic bank keeps in foreign currency with a correspondent bank abroad; a vostro account (“your account with us”) is the rupee account a foreign bank keeps with a bank in India. They underpin foreign remittances and trade settlement and operate within the RBI / FEMA framework that also governs the <a href="/glossary/#lrs">Liberalised Remittance Scheme</a>. FEMA rulebook →
Standing Liquidity Facility (SLF)
A standing arrangement under which the RBI provides assured liquidity to banks and primary dealers against the collateral of government securities, outside the discretionary auction window. It supplements the day-to-day liquidity adjustment operations and gives the system a dependable backstop for short-term funding needs. Repo rate →
External Commercial Borrowing (ECB)
Foreign-currency or rupee-denominated loans that eligible Indian firms raise from recognised lenders abroad — foreign banks, multilateral institutions, suppliers or overseas bond markets — under the RBI’s FEMA framework. The rules cap the all-in cost, set minimum maturities and define permitted end-uses so that overseas borrowing does not destabilise the external account. Liberalised Remittance Scheme →
Aadhaar-enabled Payment System (AePS)
A bank-led payment channel that lets a customer use their Aadhaar number and a fingerprint to make basic transactions — cash withdrawal, deposit, balance enquiry and fund transfer — at a business correspondent’s micro-ATM, with no card or PIN. Built on the NPCI’s interoperable rails, it extends banking to the last mile and underpins direct-benefit-transfer payouts. NPCI →
Foreign Direct Investment (FDI)
Investment by a foreign entity that buys a lasting stake in an Indian business — typically equity in an unlisted company or 10%+ of a listed one — with a say in management. It is ‘patient’ capital governed by the FDI policy and FEMA, routed automatically or through government approval depending on the sector. FEMA / forex crosswalk →
Foreign Portfolio Investment (FPI)
Investment by a registered foreign investor in Indian listed securities — shares, bonds and other market instruments — without control over the company. It is more liquid and volatile than FDI, capped per investor below the FDI threshold, and regulated by SEBI alongside FEMA. FEMA / forex crosswalk →
FEMA (Foreign Exchange Management Act)
The 1999 Act that governs every foreign-exchange transaction in India — cross-border payments, external trade, foreign investment and remittances — replacing the older FERA with a civil, liberalised framework. The RBI administers it through Master Directions and rules that underpin schemes such as the <a href="/glossary/#lrs">Liberalised Remittance Scheme</a>, <a href="/glossary/#fdi">FDI</a> and <a href="/glossary/#fpi">FPI</a>. FEMA / forex crosswalk →
Credit Score (CIBIL)
A three-digit number, usually between 300 and 900, that sums up how reliably a borrower has repaid past loans and credit-card dues. In India it is computed by RBI-licensed credit information companies such as TransUnion CIBIL, Experian, Equifax and CRIF High Mark from your credit history; lenders use it to decide whether to approve a loan and at what interest rate. A higher score signals lower credit risk and usually a better rate. Personal loan rules →
EMI Moratorium
A temporary, RBI-permitted pause on loan repayments under which a borrower may defer equated monthly instalments (EMIs) for a defined period without the loan being downgraded to <a href="/glossary/#gnpa">non-performing</a>. Interest normally keeps accruing during the pause and is added to the outstanding balance, so the loan tenor or instalment size rises afterwards. The best-known example was the COVID-19 moratorium the RBI allowed in 2020. NPA tracker →
Foreclosure / Pre-closure Charges
A fee some lenders levy when a borrower repays a loan in full before the end of its tenor (also called pre-closure or prepayment charges). RBI rules bar such charges on floating-rate loans taken by individuals for non-business purposes, so they mainly apply to fixed-rate loans and certain business loans. The applicable charge must be disclosed up front in the <a href="/glossary/#kfs">Key Facts Statement</a>. Key Facts Statement →
Loan-to-Value ratio (LTV)
The loan amount expressed as a percentage of the value of the asset pledged against it — most often property or gold. The RBI caps LTV by loan type to limit lender risk: housing-loan ceilings step down as the loan size rises (up to about 90% for the smallest loans), and gold loans are capped at 75% of the pledged gold’s value. A lower LTV means the borrower funds more of the purchase themselves, so the lender’s exposure is better cushioned if the asset’s value falls. Home-loan rules →
EBLR spread / mark-up
The fixed margin a bank adds over its <a href="/glossary/#eblr">external benchmark</a> (such as the repo rate) to set the rate on a floating-rate retail loan. It has two parts — a borrower-risk premium reflecting credit profile and loan type, and an operating-cost or strategic spread. The benchmark moves automatically with RBI policy, but the spread is fixed at sanction and can be reset only on defined terms, so it is the part of your interest rate the bank actually controls. Home-loan rules →
Balance transfer (loan)
Moving an outstanding loan from one lender to another to get a lower interest rate or better terms — common for home and personal loans. The new lender pays off the old loan and the borrower repays the new one. Because RBI rules bar <a href="/glossary/#foreclosure-charges">foreclosure or prepayment penalties</a> on floating-rate loans taken by individuals for non-business purposes, switching is cheaper than it once was; borrowers still weigh processing fees and any fixed-rate charges against the interest saved. Home-loan rules →
Processing fee
A one-time charge a lender levies to cover the cost of evaluating and sanctioning a loan — usually a small percentage of the loan amount, sometimes capped. It is generally non-refundable and may be deducted from the amount disbursed, so it raises the effective cost of borrowing. RBI rules require it to be disclosed up front in the <a href="/glossary/#kfs">Key Facts Statement</a>. Home-loan rules →
Prepayment & part-payment
Repaying a loan ahead of schedule — either in full (prepayment or foreclosure) or partly (part-payment). Cutting the principal early reduces the total interest paid and can shorten the tenor or lower the EMI. The RBI bars prepayment penalties on floating-rate loans taken by individuals for non-business purposes, so such borrowers can usually prepay free of charge. Home-loan rules →
Co-borrower
A person who applies for and takes a loan jointly with the main borrower and shares equal legal liability to repay it. Adding a co-borrower — often a spouse or family member — can raise the eligible loan amount by combining incomes, unlike a <a href="/glossary/#guarantor">guarantor</a>, who backs the loan without owning the debt. Home-loan rules →
Guarantor
A person who legally promises to repay a borrower’s loan if the borrower defaults, without being a co-owner of the debt or the financed asset. The lender can pursue the guarantor for the full outstanding amount, and standing guarantee can affect the guarantor’s own credit standing and future borrowing capacity. This differs from a <a href="/glossary/#co-borrower">co-borrower</a>, who shares ownership of the loan. Home-loan rules →
Loan moratorium vs EMI holiday
Two terms borrowers often confuse. A loan moratorium is an RBI-permitted pause on repayments (see <a href="/glossary/#emi-moratorium">EMI moratorium</a>) during which interest normally keeps accruing and is added to the outstanding balance, so the loan costs more over its life. An ‘EMI holiday’ is a lender-marketed label — sometimes the same as a moratorium, sometimes only a short deferment at the start of a loan or a single skipped instalment — and the interest treatment varies by product. The real test is whether interest still accrues during the break (it almost always does) and whether the account stays classified as standard. Always check the loan agreement and the <a href="/glossary/#kfs">Key Facts Statement</a> for how the pause is treated. NPA tracker →
Prepayment charges on a floating-rate loan
Under long-standing RBI rules, banks and NBFCs cannot levy foreclosure or prepayment charges on floating-rate term loans sanctioned to individual borrowers for non-business purposes — so a floating-rate home loan can be prepaid or foreclosed free of charge. Fixed-rate loans, and many business or non-individual loans, may still carry such charges, which must be disclosed up front in the <a href="/glossary/#kfs">Key Facts Statement</a>. This is why a borrower on a <a href="/glossary/#eblr">floating external-benchmark rate</a> can switch lenders cheaply via a <a href="/glossary/#balance-transfer">balance transfer</a>. See also <a href="/glossary/#foreclosure-charges">foreclosure / pre-closure charges</a> and <a href="/glossary/#prepayment">prepayment & part-payment</a>. Home-loan rules →
CIBIL dispute resolution
The process for correcting an error in your credit report — a loan you never took, a wrongly reported default, or an account not updated as closed. You raise a dispute with the credit information company (such as <a href="/glossary/#credit-bureau">TransUnion CIBIL</a>, Experian, Equifax or CRIF High Mark), which forwards it to the lender that reported the data for verification. Under the RBI framework, credit information companies and member lenders must resolve such disputes within prescribed timelines, and RBI’s compensation rules require a fixed payment to the borrower for each day of delay beyond the limit. A successful correction updates the record and can lift your <a href="/glossary/#credit-score">credit score</a>. Personal loan rules →
Cash credit / working-capital limit
A revolving working-capital facility through which a business can draw and repay funds up to a sanctioned limit, paying interest only on the amount actually used. It is the most common way Indian firms fund day-to-day needs such as inventory and receivables, and is typically secured against current assets and reviewed annually. The amount a borrower may actually draw at any time is capped by the <a href="/glossary/#drawing-power">drawing power</a>, computed from the value of stocks and book debts after a margin. See also <a href="/glossary/#treds">TReDS</a> and the <a href="/glossary/#cgtmse">CGTMSE</a> guarantee for collateral-free MSME credit. Priority-sector rules →
Drawing power (DP)
The maximum amount a borrower can withdraw from a <a href="/glossary/#cash-credit">cash-credit</a> or working-capital account at a given time — usually lower than the sanctioned limit. Lenders compute it from a monthly stock-and-book-debt statement: eligible current assets (stocks plus receivables) minus creditors, less a prescribed margin. If drawing power falls below the outstanding balance, the account can be flagged as irregular and may slip toward <a href="/glossary/#sma">SMA</a> classification, so timely stock statements matter for keeping a facility healthy. NPA tracker →
MSME loan restructuring
An RBI-permitted reworking of the repayment terms of a stressed micro, small or medium enterprise loan — for example a longer tenor, a repayment holiday or revised instalments — so a viable business under temporary stress can avoid default. RBI has from time to time allowed special MSME restructuring windows with eligibility conditions on exposure size and account status. A restructured account is reported as such and watched under the <a href="/glossary/#sma">special-mention-account</a> framework; if stress persists it can still become a <a href="/glossary/#gnpa">non-performing asset</a>. Restructuring is distinct from recovery action under <a href="/glossary/#sarfaesi">SARFAESI</a>. NPA tracker →
UPI mandate / e-mandate
A pre-authorised standing instruction that lets a customer approve recurring or future payments once, so the money is debited automatically when it falls due — for example a SIP, an insurance premium or a UPI AutoPay subscription. Under the RBI e-mandate framework the customer sets a maximum amount and receives a pre-debit notification before each deduction, and can pause or revoke the mandate at any time. It delivers auto-debit convenience while keeping the customer in control, with additional-factor authentication required to create the mandate and for transactions above the prescribed limit. Digital payment rules → · Related rulebook: Payment & Settlement Systems →
Chargeback
The reversal of a card or digital payment that a customer disputes with their bank — for instance a transaction they did not authorise, goods never delivered, or being charged twice. The customer’s issuing bank raises the chargeback through the card network, recovers the amount from the merchant’s acquiring bank, and provisionally credits the customer while the claim is examined under the network’s dispute rules and the RBI customer-protection and failed-transaction (turn-around-time) framework, which fixes reversal timelines and auto-compensation for delays. A chargeback is a dispute remedy, distinct from a voluntary refund issued by the merchant. Card & payment rules → · Related rulebook: Payment & Settlement Systems →
Payment Aggregator (PA)
An RBI-authorised entity that lets merchants accept cards, UPI, net-banking and wallets without building their own payment infrastructure — it collects funds from customers and settles them to the merchant. Under the RBI payment-aggregator framework a PA must hold RBI authorisation, meet a minimum net-worth, keep customer funds in an escrow account with a scheduled bank, and follow KYC, merchant-onboarding and data-storage norms (it cannot store full card numbers). This differs from a payment gateway, which only provides the technology to route a transaction and never handles the money itself. Digital payment rules → · Related rulebook: Payment & Settlement Systems →
Reserve money (M0)
The RBI’s base money — currency in circulation plus bankers’ deposits with the RBI and other deposits. As the monetary base from which broad money (M3) is created through bank lending, its growth is a core signal the RBI watches and steers through CRR, OMOs and liquidity operations. Money & liquidity → · Related rulebook: Financial Markets Regulation →
Forex reserves
India’s official foreign-exchange reserves held by the RBI — foreign-currency assets, gold, Special Drawing Rights and the IMF reserve position. They back the rupee, provide import cover and let the RBI manage exchange-rate volatility; the weekly figure is among the most-watched RBI statistics. External sector → · Related rulebook: Financial Markets Regulation →
NEER (Nominal Effective Exchange Rate)
A trade-weighted average of the rupee’s value against a basket of major trading-partner currencies, shown as an index rather than a single bilateral rate. Where USD/INR tracks the dollar alone, the NEER captures the rupee’s broad external strength; the RBI publishes 40-currency and 6-currency versions. A fall in the index means the rupee has weakened on average against the basket. Exchange rate dashboard → · Related rulebook: Financial Markets Regulation →
REER (Real Effective Exchange Rate)
The NEER adjusted for the inflation gap between India and its trading partners. By stripping out relative price changes it gauges the rupee’s true competitiveness: a reading above its base of 100 suggests the rupee is over-valued in real terms, which can weigh on export competitiveness. The RBI watches it under its managed-float framework. Exchange rate dashboard → · Related rulebook: Financial Markets Regulation →
Legal Entity Identifier (LEI)
A 20-character global code that uniquely identifies a legal entity in financial transactions, issued in India by Legal Entity Identifier India Ltd (a CCIL subsidiary). The RBI has made an LEI mandatory in stages for large-value borrowers, for participants in OTC derivative and money/government-securities markets, and for big-value RTGS and NEFT payments, so that exposures to a single counterparty can be aggregated across the system. A borrower without a valid, renewed LEI above the prescribed threshold cannot get fresh limits enhanced or renewed. Master Direction crosswalk →
Positive Pay System
A cheque-fraud safeguard under which the issuer of a high-value cheque re-confirms its key details — date, payee, amount and cheque number — to the bank electronically before it is presented, so the paying bank can match the two and stop tampered or forged cheques. The RBI framework makes the facility available for cheques above a set value (banks may make it compulsory at higher thresholds); it is delivered for inter-bank cheques through NPCI’s Cheque Truncation System. It re-confirms an instruction the customer has already issued, and does not by itself stop payment. Payment systems →
Cheque Truncation System (CTS)
The RBI clearing system in which a cheque is cleared from a scanned image and its electronic data rather than by physically moving the paper instrument between banks. By stopping the inter-city movement of cheques, CTS shortens clearing to a single grid (a cheque is typically realised within about a working day), cuts handling cost and clearing fraud, and underpins the Positive Pay match. The paper cheque stays with the presenting bank, which keeps it for the prescribed retention period. Payment systems →
Bharat Bill Payment System (BBPS)
An RBI-conceived, NPCI-operated interoperable platform for recurring bill payments — electricity, gas, water, telecom, insurance premia, loan EMIs, education fees and more — through a single network of banks and apps, with instant confirmation and a standard complaint-handling framework. A bill paid through any BBPS-enabled channel reaches the biller via the same rails, so customers get a uniform experience and assured credit. Bill aggregators and operating units in the system are onboarded as Bharat Bill Payment Operating Units under the RBI payment-system rules. Payment systems →
Basel III
The global bank-capital and liquidity standard the RBI has phased in for Indian banks. It raises both the quality and the quantity of capital a bank must hold against its risk-weighted assets, adds capital buffers (the capital conservation buffer and, when activated, the countercyclical buffer), and brings in minimum liquidity ratios (the LCR and NSFR) plus a leverage-ratio backstop. It rests on three pillars: minimum capital requirements, supervisory review (ICAAP and SREP), and market disclosure. Capital & Basel rules →
Loan write-off
An accounting step in which a bank removes a fully-provided bad loan from its balance sheet, which cleans up the books and usually lowers the reported gross-NPA ratio. A write-off does not waive the debt or release the borrower: the bank keeps pursuing recovery, and any amount later recovered flows back as income. A technical or prudential write-off is booked at head-office level while the loan stays live at the branch for recovery. NPA tracker →
Haircut
The shortfall a lender accepts between what a stressed borrower owes and what it actually recovers when a loan is settled, restructured or resolved — for example under the Insolvency and Bankruptcy Code or a one-time settlement. A 60% haircut means the lender recovers about 40 paise on every rupee of admitted claim. In money-market usage the same word also means the discount applied to the value of collateral, such as government securities pledged for funds. NPA tracker →
NRE / NRO / FCNR accounts
The three main bank accounts available to non-resident Indians under RBI and FEMA rules. A Non-Resident External (NRE) account holds income earned abroad converted into rupees, is freely repatriable, and its interest is tax-free in India; a Non-Resident Ordinary (NRO) account holds income earned in India such as rent, dividends or pension, with limited repatriation and taxable interest; a Foreign Currency Non-Resident (FCNR) account is a term deposit kept in foreign currency, shielding the depositor from rupee-exchange risk. Deposit & rate rules →
Letter of Credit (LC)
A bank's written undertaking, given on behalf of a buyer, to pay a seller a stated sum once the seller presents the shipping and other documents specified in the credit. It substitutes the bank's creditworthiness for the buyer's, so an exporter can be paid even if the importer cannot, and it is the workhorse instrument of trade finance. Common variants include the irrevocable LC, the confirmed LC (where a second bank adds its own guarantee) and the standby LC, which pays only if the buyer defaults. Bank Guarantee →
Bank Guarantee (BG)
A bank's promise to pay a beneficiary a defined amount if its own customer fails to meet a contractual or financial obligation. A financial guarantee backs a payment, while a performance guarantee backs the completion of work or supply of goods. Unlike a letter of credit, which is a primary payment mechanism for trade, a guarantee is invoked only on default, so the bank carries it as a contingent liability and a non-fund-based limit on the borrower. Letter of Credit →
IFSC code
The Indian Financial System Code, an eleven-character code that uniquely identifies a specific bank branch on India's electronic payment networks. The first four characters denote the bank, the fifth is always a zero, and the last six identify the branch. Every NEFT, RTGS and IMPS transfer needs the beneficiary's IFSC so the money reaches the correct branch, and the RBI maintains the master list of valid codes. NEFT / RTGS →
SWIFT
The Society for Worldwide Interbank Financial Telecommunication, a global member-owned network that lets banks exchange secure, standardised messages to instruct cross-border payments and other transactions. SWIFT carries the instructions, not the money itself; the funds settle through the banks' correspondent nostro and vostro accounts. Each member bank is identified by a unique SWIFT or BIC code, the international counterpart to a domestic IFSC. Nostro / Vostro →
Demand Draft (DD)
A prepaid payment instrument a bank issues against funds collected up front, ordering one of its branches to pay a named beneficiary a fixed sum. Because the bank has already debited the purchaser, a demand draft cannot bounce for want of funds, which is why it is often asked for in tenders, admissions and large one-off payments. It differs from a cheque, which is drawn on the customer's own account and can be returned unpaid. NEFT / RTGS →
Money mule account
A bank account used — often by an unwitting customer lured with easy money — to receive and pass on the proceeds of online fraud, layering the funds so they are hard to trace. The RBI and banks treat mule-account detection as a core part of KYC and anti-money-laundering monitoring; accounts showing sudden high-velocity in-and-out transfers can be frozen and reported. Never share account or UPI access with strangers offering commissions — the account holder can face legal action even if unaware. KYC / AML →
Cheque dishonour (Section 138)
When a cheque is returned unpaid — most often for insufficient funds in the drawer’s account. Beyond bank charges, a bounced cheque issued to discharge a debt can attract criminal liability under Section 138 of the Negotiable Instruments Act, with the payee able to issue a statutory demand notice and pursue a complaint if payment is not made. Repeated dishonour can also lead a bank to withdraw cheque facilities. Positive Pay →
Form 15G / 15H
Self-declarations a depositor submits so a bank does not deduct tax at source (TDS) on interest when the person’s total income is below the taxable limit. Form 15G is for individuals below 60; Form 15H is for senior citizens aged 60 and above. They must be filed afresh each financial year, and giving a false declaration carries penalties — so they should be used only when income genuinely falls below the threshold. NRE / NRO / FCNR →
MICR code
The nine-digit Magnetic Ink Character Recognition code printed at the foot of a cheque that identifies the bank and branch for clearing. Read by machines using magnetic ink, it sped up the sorting of paper cheques and still appears on cheque leaves even though most clearing now runs through the image-based Cheque Truncation System. Unlike the IFSC used for electronic transfers, the MICR code is tied to physical cheque clearing. Cheque Truncation System →
Sweep-in / Auto-sweep deposit
A facility that automatically moves balance above a set threshold from a savings or current account into a linked fixed deposit, so idle money earns the higher term-deposit rate, and pulls it back — a reverse sweep — whenever the account needs funds to clear a payment. It lets a customer keep liquidity in a CASA account while still earning FD-level interest on the surplus, usually with the broken portion paid at the applicable FD rate. CASA →
CBDC (Digital Rupee / e-Rupee)
The Reserve Bank’s central bank digital currency — sovereign money issued in digital form, the same as a banknote but held in a digital wallet instead of as a bank deposit. A retail e-Rupee (e₹-R) is piloted for everyday payments and a wholesale version for settling interbank and securities trades. Unlike UPI, which moves money between bank accounts, CBDC is a direct claim on the RBI and can settle without an intermediary bank. UPI & payments →
Prepaid Payment Instrument (PPI)
A payment instrument loaded with value in advance — such as a wallet, prepaid card or gift card — that a holder can spend up to the stored balance. RBI rules separate small, minimum-KYC PPIs with low limits from full-KYC PPIs that allow higher balances and fund transfers, and require the underlying money to be kept in an escrow account. Interoperable wallets can now send and receive over UPI. UPI & payments →
Credit Information Company (CIC / CIBIL)
An RBI-licensed bureau — such as TransUnion CIBIL, Experian, Equifax or CRIF High Mark — that gathers borrowers’ loan and repayment records from lenders and compiles them into a credit report and score lenders use to judge creditworthiness before sanctioning a loan. Borrowers are entitled to one free full credit report a year, and lenders must report and correct data within defined timelines. Asset quality →
Safe Deposit Locker
A small safe rented out inside a bank's strong-room where a customer keeps valuables, governed by RBI's revised locker framework. The bank and the hirer sign a model agreement, lockers are allotted in a transparent waiting-list order, and the bank must run a secure-premises and access-logging regime. Where the bank is negligent — fire, theft, fraud or building collapse — its liability for the contents is capped at a multiple of the locker's annual rent; ordinary force-majeure losses are excluded, so customers are advised to insure high-value items separately. Deposit insurance (DICGC) →
Internal Ombudsman (IO)
A senior, independent grievance-review authority that the RBI requires larger banks and certain NBFCs and payment operators to appoint. Before a customer complaint is rejected or only partly allowed, it must be escalated to the Internal Ombudsman for a final internal view, adding a layer of impartial scrutiny inside the institution. It sits below the RBI's external Banking Ombudsman scheme (RB-IOS): only if the IO route does not satisfy the customer does the complaint move to the RBI's ombudsman. Banking Ombudsman (RB-IOS) →
Nomination facility
The right of a deposit holder, locker hirer or safe-custody customer to name the person who should receive the balance or contents on their death, letting the bank release them without insisting on a will or succession certificate. A nominee is a trustee who receives the assets, not necessarily the final legal owner, so disputes among heirs are settled separately. The RBI repeatedly urges banks to register nominations for every account, which is a key safeguard against funds drifting into the unclaimed-deposit pool. Unclaimed Deposits & DEAF →
Early Warning Signals (EWS) / Red Flagged Account (RFA)
A fraud-risk early-detection mechanism the RBI requires lenders to operate. Tell-tale indicators — such as diversion of funds, frequent change of auditors, unusual related-party dealings or non-cooperation — are flagged as Early Warning Signals. When the concerns are serious enough, the account is tagged a Red Flagged Account, triggering closer monitoring and, where warranted, a forensic audit. The framework is meant to catch borrower distress and wrongdoing early, before slippage into NPA or a declared fraud. Wilful defaulter →
EMI reset on floating-rate loans
The process by which a lender adjusts a floating-rate retail loan when the external benchmark moves. Under RBI's reset framework, when interest rates rise the borrower must be offered clear choices — increase the EMI, extend the tenor, pay a lump sum to reduce the outstanding, or a mix — rather than silently lengthening the loan. Lenders must disclose the impact, allow a switch to a fixed rate where available, and not levy hidden charges, so a rate-cycle change does not quietly balloon the cost of the loan. External Benchmark Lending Rate (EBLR) →
Penal charges (vs penal interest)
What a lender may levy when a borrower defaults or breaches a loan term, reshaped by RBI's Fair Lending framework on penal charges. The key shift: a breach is charged as a flat 'penal charge', not as 'penal interest' added on top of the rate of interest, and these charges cannot themselves be capitalised — no interest is computed on the penalty. They must be reasonable, proportionate to the default, disclosed up front in the loan agreement and Key Fact Statement, and not used as a revenue tool. The aim is to stop opaque, compounding penalties quietly inflating the cost of a retail loan. Key Fact Statement (KFS) →
Annual Percentage Rate (APR)
The all-in annual cost of a loan expressed as a single percentage, designed so a borrower can compare offers on a like-for-like basis. Unlike the headline interest rate, the APR folds in processing fees, documentation and other recurring charges, and (for digital loans) is a mandatory line in the RBI-required Key Fact Statement. Two loans with the same nominal rate can carry very different APRs once fees are counted, so the RBI treats the APR as the honest sticker price that lenders must disclose before a borrower commits. Key Fact Statement (KFS) →
Additional Factor of Authentication (AFA)
The RBI's long-standing requirement that most card and digital-payment transactions be cleared by a second, independent check — a one-time password, PIN, biometric or device-bound token — over and above the card or account details themselves. AFA is what turns a stolen card number alone into a dead end, and the framework has steadily evolved to cover online card payments, recurring e-mandates and tokenised transactions, with narrow carve-outs (such as small-value contactless taps) defined by the RBI. It is the backbone of India's two-factor payment-security regime. Card tokenisation →
Fixed Deposit (FD)
A term deposit where a customer locks a lump sum with a bank for a chosen tenor at a pre-agreed interest rate, the most common savings instrument in Indian banking. The rate is fixed for the term, interest can be paid out or compounded, and the deposit can usually be broken early subject to a penalty and a lower applicable rate. Bank FDs (and other eligible deposits) are covered by DICGC deposit insurance up to the RBI/DICGC-specified limit per depositor per bank, which makes them a low-risk anchor for household savings. Deposit insurance (DICGC) →
Bulk deposit
A single rupee term deposit at or above the threshold the RBI sets for 'bulk' deposits (for scheduled commercial banks this has been Rs 3 crore and above, as revised by the RBI from time to time). Banks may offer differential, often negotiated, interest rates on bulk deposits versus ordinary retail deposits, and must disclose their bulk-deposit rate card. The distinction matters for banks' liability mix and CASA strategy, and for treasurers placing large corporate or institutional surpluses — making it a banker-native term rather than a retail one. CASA ratio →
Minimum balance / Average Monthly Balance (AMB)
The floor balance a bank expects a customer to keep in a regular savings or current account, usually measured as an average across the month (AMB) rather than on any single day. If the average falls short, the bank may levy a non-maintenance charge. Under RBI's customer-protection framework these charges must be reasonable, set in proportion to the shortfall (not a flat penalty), disclosed up front and not allowed to push the account into a negative balance. Customers who want to avoid the requirement entirely can opt for a zero-balance Basic Savings Bank Deposit Account. Basic Savings Bank Deposit Account (BSBDA) →
Inoperative / dormant account
A savings or current account is classified 'inoperative' (commonly called dormant) when there has been no customer-induced transaction for an extended period defined by the RBI — long understood as two years. The bank cannot charge a penalty merely for the account being inoperative, must keep paying interest on a savings balance, and follows an RBI-set process to let the customer reactivate it through fresh KYC. If a deposit stays unclaimed well beyond that, the balance is eventually moved to the RBI's Depositor Education and Awareness Fund, though the customer's right to claim it never lapses. Unclaimed Deposits & DEAF →
Gold loan (loan against gold)
A secured loan where a borrower pledges gold jewellery or coins and the bank lends against its appraised value. The RBI caps how much can be advanced relative to the gold's value through a loan-to-value ceiling (set and revised by the RBI from time to time), prescribes how the gold must be assayed, stored and auctioned on default, and has tightened conduct norms after concerns about valuation and end-use. It is a fast, collateral-rich form of credit widely used by households and small businesses, which is why its rules sit at the centre of RBI's retail-lending oversight. Loan-to-Value ratio (LTV) →
Overdraft (OD)
A credit facility that lets an account holder draw more than the balance in the account, up to a sanctioned limit, with interest charged only on the amount actually used. Overdrafts can be secured (against a deposit, property or securities) or clean, and are a flexible everyday-liquidity tool for individuals and businesses. They sit alongside cash credit as the two classic working-capital limits, the difference being that an overdraft runs on a regular operating account while cash credit is a dedicated business limit drawn against stock and receivables. Cash credit / working-capital limit →
Cooling-off / look-up period (digital lending)
A borrower's no-questions-asked exit window under the RBI's Digital Lending framework: after taking a digital loan the customer can repay the principal plus a proportionate cost and walk away within an RBI-mandated cooling-off (look-up) period, without paying any prepayment penalty. It is a deliberate consumer-protection brake on app-based lending — giving people who borrow in a few taps a guaranteed chance to reconsider — and pairs with the Key Fact Statement, which must spell out the all-in cost before the loan is disbursed. Key Fact Statement (KFS) →
Sovereign Gold Bond (SGB)
A government security issued by the RBI on behalf of the Government of India, denominated in grams of gold rather than rupees, so its value tracks the gold price. It carries a fixed 2.5% per annum interest paid half-yearly on the issue amount, runs for eight years with an exit option from the fifth year, and capital gains on redemption at maturity are tax-exempt for individuals — a paper alternative to holding physical gold. Gold loan (loan against gold) →
RBI Retail Direct
The RBI Retail Direct Scheme lets an individual open a Retail Direct Gilt (RDG) account directly with the RBI and buy or sell government securities — Treasury Bills, dated G-Secs, State Development Loans and Sovereign Gold Bonds — in the primary auctions and secondary market, with no account-opening or transaction fee. It opens government debt, traditionally an institutional market, to ordinary retail investors. Government Securities (G-Sec) →
Floating Rate Savings Bond (FRSB)
A taxable savings bond issued by the RBI on behalf of the Government of India with a seven-year tenor and no fixed coupon: its interest is reset every six months and is pegged to the prevailing National Savings Certificate (NSC) rate plus a fixed spread of 0.35 percentage points. Interest is paid half-yearly (not cumulative), making it a government-backed instrument whose return moves with small-savings rates. Government Securities (G-Sec) →
Recurring Deposit (RD)
A term deposit in which a customer deposits a fixed sum every month for a chosen tenor at an interest rate fixed at the outset, receiving the principal plus compounded interest at maturity. Unlike a lump-sum Fixed Deposit it builds savings in instalments, and like an FD it is covered by DICGC deposit insurance up to the prescribed limit. Fixed Deposit (FD) →
Bancassurance
An arrangement in which a bank distributes insurance products to its customers, acting as a corporate agent (or under a broking licence) for one or more insurers. The insurance business itself is regulated by IRDAI while the RBI oversees the bank's conduct; regulators have repeatedly flagged mis-selling and the need to ensure products are suitable and sold without coercion at the branch. RBI Ombudsman →
Customer liability on unauthorised transactions (zero-liability)
The RBI framework that caps how much a customer can lose when money leaves their account through fraud they did not authorise. The core idea: if the customer reports the unauthorised electronic transaction promptly and the loss was not due to their own negligence, their liability is zero and the bank must re-credit (shadow-reverse) the amount within a defined timeline. Where the delay in reporting is longer, a limited, slab-based liability may apply, as specified by the RBI. The burden of proving customer negligence sits with the bank, not the customer — which is what makes this a powerful retail protection that banks rarely advertise plainly. Additional Factor of Authentication (AFA) →
Kisan Credit Card (KCC)
A short-term revolving credit line for farmers, run through banks under an RBI/NABARD framework, that finances crop inputs, working capital and allied agricultural needs without a fresh loan application each season. It works like an overdraft against an assessed scale of finance: the farmer draws and repays within a sanctioned limit, interest is charged only on what is used, and timely repayment can attract government interest subvention. KCC lending counts toward a bank's priority-sector agriculture target, so it sits at the intersection of retail rural banking and PSL compliance — a banker-native product RBI documents in dense master-circular language. Priority Sector Lending (PSL) →
MUDRA loan (PMMY)
A collateral-free business loan for tiny, non-farm enterprises extended by banks, NBFCs and MFIs under the Pradhan Mantri MUDRA Yojana and refinanced through MUDRA. Loans are bucketed by ticket size into the well-known Shishu, Kishore and Tarun tiers (smallest to largest, with limits revised by the government from time to time), aimed at micro-units such as shops, vendors, artisans and small manufacturers. Because they are unsecured and target the smallest borrowers, MUDRA loans typically qualify as priority-sector micro-enterprise lending — making them both a financial-inclusion vehicle and a banker-native PSL instrument. Priority Sector Lending (PSL) →
Soiled & mutilated note refund (Note Refund Rules)
The customer-facing right to exchange damaged banknotes for full or part value at bank branches, governed by the RBI's Note Refund Rules. A 'soiled' note is dirty or worn but otherwise whole and is exchanged at full value; a 'mutilated' note is torn or missing a portion and is refunded at full or half value depending on how much of the note and its essential features survive, as assessed against the rules. Banks are obliged to accept and adjudge these notes for the public, free of charge — a high-frequency counter service that the RBI defines in technical language most customers never read. Currency chest →
Lien marking
A bank's right to place a hold on funds or a deposit so the customer cannot withdraw them until a specified condition is cleared. A lien may be marked, for example, on a fixed deposit pledged as security for a loan, on disputed or erroneously credited amounts, or under a legal or regulatory order. The money still belongs to the customer, but it is frozen for the duration of the lien; the bank must have a valid basis and should inform the customer. Lien marking is distinct from an account freeze and from set-off, and is a routine but poorly-explained mechanism that surfaces in loan, recovery and fraud situations. Safe deposit locker →
Business Correspondent (BC)
A retail agent appointed by a bank to provide basic banking at a doorstep or in a village where there is no branch. Acting under the RBI's business-correspondent framework, the BC can open accounts, accept small deposits and withdrawals, disburse and recover small loans and process remittances on the bank's behalf, typically using a micro-ATM or mobile device. The bank remains fully responsible for the BC's conduct and for protecting customers, making BCs a backbone of India's financial-inclusion push into the last mile. Basic Savings Bank Deposit Account (BSBDA) →
Doorstep Banking
A service in which the bank brings basic transactions to the customer's home or office instead of requiring a branch visit. The RBI requires banks to offer doorstep banking, especially to senior citizens above a notified age and to differently-abled customers, covering services such as cash pickup and delivery, cheque collection, delivery of demand drafts and submission of KYC or life-certificate documents. It is meant to make banking accessible to those who find it hard to travel, within the bank's published charges and safeguards. Business Correspondent (BC) →
Self-Help Group (SHG) Bank Linkage
A model in which small groups of mostly low-income members pool regular savings and the bank then lends to the group rather than to each individual. Promoted by NABARD and the RBI, SHG-Bank Linkage lets the group on-lend to its members, with the group's own discipline and joint accountability substituting for formal collateral. It is one of the largest microfinance channels in India and is treated as priority-sector lending, helping banks reach borrowers who would otherwise be outside the formal credit system. Priority Sector Lending (PSL) →
Factoring
A financing arrangement in which a business sells its unpaid invoices (receivables) to a financier at a discount to get cash immediately instead of waiting for the buyer to pay. Governed by the Factoring Regulation Act and the RBI's rules, the factor takes over collection of the receivable and, depending on the contract, may or may not bear the risk of the buyer defaulting. Factoring is widely used by MSMEs to ease working-capital pressure and is closely related to invoice-discounting platforms regulated by the RBI. TReDS (Trade Receivables Discounting System) →
Floating Provisions
General provisions a bank sets aside over and above the specific provisions required against identified bad loans, acting as a cushion for future or unforeseen losses. Under the RBI's framework these are not tied to any particular account, cannot normally be reversed to inflate profits, and may be used to absorb losses only in extraordinary situations or with regulatory permission, often during a downturn. They strengthen a bank's resilience by building a buffer in good times that can be drawn on when credit stress rises. Provision Coverage Ratio (PCR) →
Hypothecation
A way of giving a movable asset as security for a loan while the borrower keeps possession and use of it. In hypothecation the bank gets a charge over goods such as vehicles, stock-in-trade or machinery, but the borrower continues to hold and use them, for example driving the car or selling and replacing inventory. If the borrower defaults, the bank can take possession and sell the asset to recover its dues. It is the most common security for vehicle and working-capital loans, and the charge is typically registered so other lenders can see it. Pledge →
Pledge
A form of loan security where the borrower hands over physical possession of a movable asset to the lender until the loan is repaid. Classic examples are gold pledged for a gold loan or goods stored in a lender-controlled warehouse. Because the lender actually holds the asset, a pledge gives stronger control than hypothecation, where possession stays with the borrower. If the borrower defaults, the lender can sell the pledged goods, usually after due notice, to recover what is owed. Hypothecation →
Mortgage
The use of immovable property such as land, a house or a building as security for a loan. In a registered mortgage the charge is formally recorded with the sub-registrar, while in an equitable mortgage the borrower simply deposits the title deeds with the lender to create the security. Home loans and loans against property are typically secured by mortgage, and on default the lender can enforce its rights, including under the SARFAESI Act, to sell the property and recover dues. SARFAESI Act →
Letter of Undertaking (LoU)
A form of bank guarantee once used in trade finance, in which one bank assured another that it would repay a customer's short-term overseas credit if the customer failed to. Because LoUs were issued for importers to raise cheap foreign-currency funding, weak controls around them were at the centre of a major banking fraud, after which the RBI discontinued LoUs and Letters of Comfort for trade credit. Today legitimate import financing relies on instruments such as letters of credit and bank guarantees, which carry tighter documentation and audit trails. Letter of Credit (LC) →
Right of Set-off / Banker's Lien
A bank's right to combine or hold a customer's funds against what the customer owes it. Right of set-off lets the bank adjust a credit balance in one account against an overdue balance in another of the same customer, while a banker's lien lets it retain securities or instruments lawfully in its possession until dues are cleared. Both must be exercised within the law and the account terms, usually with notice, and cannot touch accounts held in a different capacity such as trust or minor accounts. Lien Marking →
Escrow Account
A bank account where money is held by the bank as a neutral third party and released only when agreed conditions between two parties are met. It is widely used in property purchases, where a homebuyer's instalments are routed through an escrow so funds reach the developer only as construction milestones are completed, protecting both sides from default. The bank operating the escrow follows the written escrow agreement and does not release funds on the instruction of just one party. Right of Set-off / Banker's Lien →
Periodic KYC Updation (re-KYC)
The RBI requirement that banks refresh a customer's Know Your Customer records at intervals through the life of the relationship, not just at account opening. The bank re-confirms identity and address details and records any changes, with the frequency set on a risk-based basis — more often for higher-risk customers and less often for low-risk ones. If a customer does not complete the periodic update when it falls due, the bank may place restrictions on the account until the records are brought up to date. KYC / AML →
Garnishee Order
A court order that directs a bank holding its customer's funds to freeze them and pay towards a debt the customer owes to a third party who has won a claim. The bank, as the garnishee, must comply with the order rather than the customer's instructions, and can attach only the balance actually due to the customer. It differs from the bank's own right of set-off: a garnishee order comes from a court at the request of an outside creditor, whereas set-off is the bank recovering what the customer owes the bank itself. Right of Set-off / Banker's Lien →
Call & Notice Money
The very short-term interbank market where banks lend and borrow surplus funds among themselves to manage day-to-day liquidity. Call money is repayable on demand, typically overnight, while notice money runs for a few days up to a fortnight. The rate negotiated here — the call rate — tends to move within the RBI's policy corridor, since a bank short of cash will not pay much more than it would to borrow from the RBI, nor lend for much less than it would earn by parking funds with the RBI. Repo rate timeline →
Digital Banking Unit (DBU)
A specialised fixed banking outlet, set up under the RBI framework, that delivers banking services in a largely digital, self-service environment rather than through traditional teller counters. A DBU lets customers open accounts, transact, apply for products and get assistance through digital terminals and assisted kiosks, extending digital banking reach including to areas with limited branch presence. It is a physical point, staffed lightly, but built around digital channels — sitting between a full branch and purely app-based banking. Doorstep Banking →
Standing Instruction
A pre-set order a customer gives the bank to make a fixed, recurring payment automatically on chosen dates, such as a monthly rent transfer, an insurance premium or a loan EMI. Once registered, the bank executes the debit without the customer having to act each time, and only stops it on cancellation or insufficient balance. Standing instructions differ from mandates routed through NACH or UPI in that they are usually internal to one bank, but the idea is the same: authorise once, let the payment repeat. The customer stays responsible for keeping enough balance, since a failed instruction can attract a charge. NACH Mandate →
Stale Cheque
A cheque presented for payment after its validity period has lapsed, which the bank will return unpaid. In India a cheque is generally valid for three months from the date written on it, so a cheque dated earlier than that is treated as stale and must be re-issued by the drawer. The rule protects both the payer and the bank from very old instruments being cashed long after the underlying transaction. To avoid a stale cheque, deposit it well within its validity or ask the issuer for a fresh one. Positive Pay →
Post-dated Cheque (PDC)
A cheque written with a future date, which a bank should not pay before that date arrives. PDCs are commonly handed over as security or for scheduled payments such as loan instalments, and the holder must wait until the stated date to present it. Presenting or paying a post-dated cheque early is irregular, and if dishonoured on or after its date for want of funds it can attract the same consequences as any other bounced cheque. Many recurring payments that once relied on PDCs have shifted to electronic mandates, which are easier to track and cancel. Cheque Bounce / Section 138 →
Encumbrance Certificate
A document, usually from the property sub-registrar, that shows whether a piece of immovable property carries any registered charge, mortgage or legal liability over a given period. Lenders insist on an encumbrance certificate before sanctioning a home loan or loan against property to confirm the title is clean and not already pledged elsewhere. A clear certificate gives comfort that the property can be offered as security, while entries on it warn of existing loans or disputes that must be resolved first. Mortgage →
Days Past Due (DPD)
The number of days a loan repayment has remained overdue beyond its due date, a core metric in credit reporting and account monitoring. A rising DPD count signals growing stress: an account is watched closely as it crosses early buckets, is flagged as a Special Mention Account well before default, and slips into non-performing territory once dues stay unpaid for a prolonged period. Credit bureaus record DPD history, so even short delays can mark a borrower's report and affect future loan eligibility. Special Mention Account (SMA) →
Pay Order / Banker's Cheque
A payment instrument issued by a bank, drawn on itself, used to make a guaranteed payment within the same city or clearing zone. Because the bank debits the customer's account upfront and then promises to pay the named beneficiary, a pay order (also called a banker's cheque) cannot bounce for want of funds, which makes it popular for fee payments, registrations and property deals. It is close cousin to a demand draft, the main difference being that a draft is typically used for payments payable at another centre while a pay order is meant for local payment. Both are safer than a personal cheque because the money is already set aside. Demand Draft (DD) →
Nodal Account
A special pass-through account in which a payment aggregator or intermediary holds money that belongs to merchants and customers rather than to the intermediary itself. Funds collected from a buyer sit briefly in the nodal account and are then settled out to the merchant, so the intermediary never treats the money as its own and cannot use it for other purposes. The structure protects customer money in the event the intermediary fails, and the timing of credits and settlements through such accounts is closely supervised. Newer rules have been moving many such flows toward dedicated escrow-style arrangements with banks. Payment Aggregator →
Letter of Comfort
A written assurance, often from a parent company or a bank, indicating moral or financial support for a borrower without creating the same hard, enforceable obligation as a formal guarantee. A lender may accept a letter of comfort to feel reassured that a group will stand behind its subsidiary, but the exact legal weight depends entirely on how the wording is framed. Because it sits in a grey zone between a mere statement of intent and a binding promise, both sides need to be precise about what is actually being committed. It is distinct from a letter of undertaking, which carries firmer payment obligations. Letter of Undertaking (LoU) →
Suspense Account
A temporary holding account where a bank parks entries it cannot yet classify or post to their proper place, pending investigation. Items such as an unidentified inward remittance, a mismatched charge or a transaction awaiting documentation may rest here until the correct treatment is confirmed and the entry is cleared out. A well-run bank keeps suspense balances small and ages them, since long-pending items can hide errors or even fraud. The account is meant to be a short-lived parking bay, not a permanent home for unresolved entries. Bank Reconciliation Statement (BRS) →
Bank Reconciliation Statement (BRS)
A statement that explains the difference between the balance shown in a customer's own books and the balance the bank shows for the same account on a given date. Timing gaps cause most differences: a cheque issued but not yet cleared, a deposit in transit, bank charges or interest not yet recorded, or a direct credit the account holder has not entered. By listing each such item, a reconciliation confirms that both sets of records agree once timing effects are removed, and it surfaces genuine errors or missing entries that need correction. It is a basic control used by both businesses and banks to keep ledgers trustworthy. Suspense Account →
IMPS (Immediate Payment Service)
An NPCI-run retail payment service that moves money between bank accounts instantly, around the clock, including weekends and holidays. A customer can send funds using the beneficiary's account number and IFSC, or through a mobile number linked to an MMID, and the credit is near-instant. Unlike the older batch-based systems it never sleeps, which is why it long served as the always-on rail before UPI became dominant. Banks may apply small charges and per-transaction limits, which vary by channel. NEFT & RTGS →
Negotiable Instrument
A written document that promises or orders the payment of a fixed sum of money and can be passed from one person to another, with the holder able to claim the amount. Cheques, bills of exchange and promissory notes are the classic examples, all governed in India by the Negotiable Instruments Act, 1881. What makes an instrument negotiable is that a person who takes it in good faith and for value gets a clean title, even if the person who passed it on had a defective one. This transferability is what lets such instruments work as a convenient substitute for cash in trade. Cheque bounce (Section 138) →
Crossing of a cheque
Two parallel lines drawn across the face of a cheque, sometimes with words like 'account payee', that instruct the bank not to pay it over the counter in cash but only through a bank account. A general crossing means the cheque must be paid into some bank account; an 'account payee' crossing further restricts the money to the account of the named payee alone. The purpose is safety: if a crossed cheque is lost or stolen, the proceeds can be traced to an account rather than vanishing as cash. It is one of the simplest fraud-prevention controls in everyday banking. Negotiable Instrument →
Endorsement
The act of signing the back of a cheque or other negotiable instrument to transfer the right to receive payment to someone else, or to deposit it. A blank endorsement is just the holder's signature, which makes the instrument payable to whoever holds it; a full or special endorsement names the next person entitled to the money. Endorsing also makes the signer liable on the instrument if it is later dishonoured. Banks examine endorsements carefully, since a missing or irregular one can be a reason to return a cheque unpaid. Negotiable Instrument →
Float (clearing float)
Money that appears to be in transit during the gap between when a payment is initiated and when it is finally settled in the beneficiary's account. For a cheque, the float is the time it spends in clearing after deposit but before the funds are confirmed; during this window the same money can look as though it sits in two places. Banks manage float carefully because it affects how much usable balance and liquidity they actually hold at any moment. Faster electronic settlement has shrunk float compared with the old paper-clearing days. Bank Reconciliation Statement (BRS) →
Working Capital
The money a business needs to fund its day-to-day operations — buying stock, paying wages and suppliers, and carrying receivables — before sales convert back into cash. In banking it is the short-term finance a bank provides for this operating cycle, most often through a <a href="/glossary/#cash-credit">cash credit</a> or <a href="/glossary/#overdraft">overdraft</a> limit set against current assets. Lenders size the limit from the borrowing-cycle gap and lend only up to the <a href="/glossary/#drawing-power">drawing power</a> backed by stock and book debts. Cash credit →
Term loan
A loan disbursed as a lump sum and repaid over a fixed period through scheduled instalments of principal and interest — used to fund long-term assets such as plant, machinery, vehicles or property, as opposed to day-to-day needs. It contrasts with revolving <a href="/glossary/#working-capital">working-capital</a> finance like <a href="/glossary/#cash-credit">cash credit</a>: a term loan steadily reduces as it is repaid, while a cash-credit limit is drawn and replenished again and again. Repayment capacity is judged from the borrower’s cash flows, often using the <a href="/glossary/#dscr">debt service coverage ratio</a>. Debt Service Coverage Ratio →
Bank Guarantee (BG)
A written undertaking by a bank to pay a specified sum to a beneficiary if the bank’s customer fails to meet a contractual obligation. A financial guarantee covers a payment default; a performance guarantee covers non-performance of work or supply. The bank lends its own creditworthiness rather than cash, charges a commission, and usually holds <a href="/glossary/#margin-money">margin money</a> and counter-security — so an invoked guarantee can crystallise into a funded liability on the customer. It is a non-fund-based facility, distinct from a <a href="/glossary/#letter-of-credit">letter of credit</a>. Letter of Credit →
Letter of Credit (LC)
A bank’s conditional promise to pay a seller on a buyer’s behalf once the seller presents shipping and other documents that exactly match the terms set out in the credit. Widely used in trade — especially imports and exports — it substitutes the bank’s credit for the buyer’s, so the seller ships with confidence of payment. Like a <a href="/glossary/#bank-guarantee">bank guarantee</a> it is a non-fund-based facility that can become a funded advance if the buyer cannot reimburse the bank on the due date; documents flow through the correspondent-banking <a href="/glossary/#nostro-vostro">nostro/vostro</a> network. Trade & FEMA rulebook →
Bill Discounting
A short-term finance facility in which a bank pays a seller the value of a trade bill or invoice up front — minus a discount — and recovers the full amount from the buyer when the bill matures. It converts receivables into immediate cash so a business need not wait out the credit period, and the discount is effectively the interest cost for the unexpired days. It differs from <a href="/glossary/#factoring">factoring</a>, which involves selling the whole receivables book and often the collection function; bill discounting is bill-by-bill and usually with recourse to the seller if the buyer does not pay. Factoring →
Debt Service Coverage Ratio (DSCR)
A measure of whether a borrower's cash flows are enough to meet its debt repayments — cash available for debt service divided by the total interest plus principal falling due in a period. A DSCR above 1 means the borrower generates more than enough to service the debt; banks typically look for a comfortable cushion (often around 1.25 or more) before sanctioning a <a href="/glossary/#term-loan">term loan</a>, and it is a core input in project and working-capital appraisal. Term loan →
Margin Money
The borrower's own contribution to a financed asset or facility — the share the bank does not fund, so that the borrower has skin in the game and the lender keeps a cushion against price falls. On a <a href="/glossary/#cash-credit">cash credit</a> limit it is the percentage of stock and receivables value the bank deducts before arriving at <a href="/glossary/#drawing-power">drawing power</a>; on a <a href="/glossary/#bank-guarantee">bank guarantee</a> or letter of credit it is the cash the bank holds against the commitment. A higher margin lowers the bank's risk. Drawing power →
Working Capital Gap
The shortfall between a business's current assets — stock, receivables and other short-term assets in its operating cycle — and the current liabilities (other than bank finance) that fund them. This gap is what bank <a href="/glossary/#working-capital">working-capital</a> finance is sized to cover; the borrower meets part from its own <a href="/glossary/#margin-money">margin money</a> and the bank funds the rest, usually as a <a href="/glossary/#cash-credit">cash credit</a> limit. Working capital →
Stock Statement
A periodic statement — usually monthly — that a working-capital borrower submits to its bank listing the value of stock (raw material, work-in-progress, finished goods) and book debts charged to the bank. The bank applies the agreed <a href="/glossary/#margin-money">margin</a> to these figures to refix <a href="/glossary/#drawing-power">drawing power</a> on the <a href="/glossary/#cash-credit">cash credit</a> account, so a late or inflated stock statement directly affects how much the borrower can draw. Drawing power →
Consortium Lending
An arrangement in which several banks jointly finance one large borrower under a common agreement, sharing the exposure, security and risk in agreed proportions, with one bank acting as the lead. It lets lenders spread the risk of a big <a href="/glossary/#working-capital">working-capital</a> or <a href="/glossary/#term-loan">term-loan</a> facility while the borrower deals with coordinated terms. It differs from multiple banking, where a borrower deals with each bank separately without a shared agreement, and from <a href="/glossary/#co-lending">co-lending</a>, an RBI-enabled bank–NBFC model for priority-sector loans. Co-lending →
Equated Monthly Instalment (EMI)
A fixed monthly payment a borrower makes to repay a loan, combining both interest and a part of the principal so the loan is fully cleared by the end of its tenure. In the early months most of the EMI goes towards interest and only a small share reduces the principal; as the loan ages that mix flips, with more of each payment chipping away at the balance. The EMI amount depends on the loan size, the interest rate and the tenure, so a longer tenure lowers the monthly outgo but raises total interest paid. On floating-rate loans the bank usually keeps the EMI steady and adjusts the tenure when rates move, though borrowers can ask to reset the EMI instead. EMI reset →
Amortisation Schedule
A table that maps out every instalment over a loan's life, showing for each payment how much goes to interest, how much reduces the principal, and the outstanding balance that remains. It lets a borrower see exactly how a loan winds down over time and how much interest is paid in total. Because early instalments are interest-heavy, the schedule also explains why prepaying in the first years saves the most interest. Lenders typically share an amortisation schedule at disbursal and reissue it whenever the rate or tenure changes. Equated Monthly Instalment (EMI) →
Collateral
An asset a borrower pledges to a lender as security for a loan, which the lender can sell to recover its money if the borrower fails to repay. Common forms include property, gold, fixed deposits, shares or business inventory, and the loan amount is usually capped at a margin below the asset's value to leave a cushion. A loan backed by collateral is called secured and generally carries a lower interest rate than an unsecured one, because the lender's risk is reduced. The exact security interest may be created through a mortgage, hypothecation or pledge depending on the asset. Hypothecation →
Sanction Letter
The written offer a bank issues once it approves a loan, setting out the sanctioned amount, the interest rate and how it is benchmarked, the tenure, the EMI, applicable fees and the conditions the borrower must meet before money is released. It is the formal record of the loan's terms and usually comes with a Key Facts Statement summarising the headline costs in plain language. Accepting the sanction letter and completing its pre-disbursal conditions, such as security creation or documentation, leads to actual disbursement. Borrowers should read it closely, since the rate, reset cycle and charges quoted here govern the loan. Key Facts Statement (KFS) →
No-Objection Certificate (NOC)
A document a lender issues to confirm it has no remaining claim on a borrower or an asset, most often given once a loan is fully repaid. For a home or vehicle loan the NOC, together with the release of the charge, lets the borrower get the lien removed and hold clear title to the property or vehicle. Banks also issue NOCs when a loan is transferred to another lender or when consent is needed for a related transaction. Obtaining and retaining the NOC is important, because without it records may still show the asset as encumbered. Foreclosure charges →
Non-fund-based limit
A credit facility under which a bank lends its name and standing rather than its cash: it does not pay out money up front but undertakes to pay a third party if the borrower defaults. Bank guarantees and letters of credit are the classic examples — the customer pays a commission for the facility, and the bank carries a contingent liability that only crystallises into a funded outflow if the guarantee is invoked or the LC devolves. Bankers assess non-fund-based limits alongside fund-based limits (cash credit, term loans) when fixing a borrower's total exposure, because an invoked guarantee can suddenly turn into a real loan on the books. Bank Guarantee (BG) →
Maximum Permissible Bank Finance (MPBF)
A method for sizing a borrower's working-capital limit, rooted in the old Tandon Committee approach: the bank funds only part of the borrower's working-capital gap and expects the borrower to bring in a minimum margin from its own funds. In broad terms the lender looks at current assets needed to run the business, subtracts current liabilities other than bank borrowing, and finances a defined share of the remaining gap so that the borrower retains a stake and the bank is not the sole source of short-term funds. Although banks now use several assessment methods, MPBF remains a banker's shorthand for the disciplined, margin-protected way of arriving at a cash-credit or overdraft limit. Working-capital gap →
Packing credit (pre-shipment export finance)
Short-term working-capital finance a bank gives an exporter to buy raw materials, manufacture, pack and ship goods against a confirmed export order or letter of credit — the funding that bridges the period before the exporter is paid by the overseas buyer. Often extended at concessional terms to support exports, packing credit is liquidated out of the eventual export proceeds (or rolled into post-shipment finance once the goods leave), and it sits within the bank's trade-finance and priority-sector lending activity. It is a core, everyday product for any banker handling export clients. Bill discounting →
Devolvement of a Letter of Credit
What happens when an importer or buyer fails to pay on the due date under a letter of credit the bank has opened on its behalf, so the obligation to pay the beneficiary falls back on — devolves on — the issuing bank. The bank, having guaranteed payment, must honour the LC and then recover the amount from its customer; the contingent, non-fund-based exposure thus turns into a real, funded advance, often debited to the customer's account or booked as a forced loan. Bankers watch devolvement closely because it converts an off-balance-sheet commitment into actual credit risk and can be an early sign of stress in a trade-finance client. Letter of Credit (LC) →
Crystallisation
The point at which a contingent or foreign-currency banking liability is fixed into a definite rupee amount owed by the customer. For an unpaid import letter of credit or an overdue foreign-currency bill, the bank crystallises the liability on a defined date by converting it at the prevailing exchange rate, after which it is treated as an ordinary rupee advance carrying interest. Crystallisation protects the bank from open-ended currency risk on a customer's behalf and marks the moment a trade or forex obligation becomes a hard, recoverable debt. Bank Guarantee (BG) →
Post-shipment export finance
Credit a bank extends to an exporter after the goods have been shipped, bridging the gap until the overseas buyer actually pays. It typically takes the form of purchasing, discounting or negotiating the export bills, or an advance against bills sent on collection, and is liquidated out of the eventual export proceeds. It is the natural sequel to pre-shipment (packing) credit — together they cover an exporter's full working-capital cycle — and, like packing credit, often qualifies for concessional treatment and counts within a bank's trade-finance and priority-sector activity. Packing credit (pre-shipment export finance) →
Export credit
The umbrella term for bank finance extended to exporters across the trade cycle: pre-shipment credit (packing credit) to buy, make and pack goods against a confirmed export order or letter of credit, followed by post-shipment credit that bridges the gap until the overseas buyer pays. It can be given in rupees or foreign currency, is liquidated out of the eventual export proceeds within the prescribed realisation timeline, and is recognised within a bank's trade-finance and priority-sector lending. Bankers treat it as a purpose-tied, self-liquidating facility rather than general working capital. Packing credit (pre-shipment export finance) →
Pre-shipment Credit in Foreign Currency (PCFC)
A version of packing credit in which the bank funds an exporter directly in foreign currency rather than rupees, against a confirmed export order or letter of credit. Because both the advance and the eventual export receivable are in the same foreign currency, PCFC gives the exporter a natural hedge against exchange-rate movement over the pre-shipment period, and is typically liquidated when the export proceeds are realised or the export bills are negotiated. Bankers offer it as the foreign-currency alternative to rupee packing credit for exporters who prefer currency-matched funding. Packing credit (pre-shipment export finance) →
Documentary collection (DA / DP)
A trade-payment method in which the exporter routes the shipping and title documents through banks, but — unlike a letter of credit — the banks act only as agents passing documents against payment or acceptance and give no guarantee of payment. Under Documents against Payment (DP) the buyer's bank releases the documents only when the importer pays; under Documents against Acceptance (DA) it releases them when the importer formally accepts a time bill promising to pay on a future date. It is cheaper and lighter than an LC but riskier for the exporter, since the bank does not undertake to pay if the buyer defaults — bankers position it between open-account trade and the full security of a letter of credit. Letter of Credit (LC) →
Loan Against Property (LAP)
A secured loan in which a borrower mortgages an owned residential or commercial property to raise funds for almost any purpose — business working capital, expansion or personal needs — while continuing to own and use the property. Because it is backed by immovable collateral, a LAP usually carries a lower rate than an unsecured personal loan and a longer tenor, with the sanctioned amount set as a share of the property's assessed value and serviced out of the borrower's income. It is one of the most common secured retail and small-business products bankers handle, and like other floating-rate retail loans it is typically priced off an external benchmark plus a spread. External Benchmark Lending Rate (EBLR) →
Working-capital cycle (operating cycle)
The time it takes a business to turn cash spent on inputs back into cash collected from customers — money goes out to buy raw materials and hold inventory, then sits in receivables until buyers pay. A longer cycle ties up more cash and means the business needs a larger working-capital limit to keep running; a shorter, faster cycle frees up cash and reduces borrowing needs. Bankers assess the working-capital cycle to size a borrower's cash-credit or overdraft limit, judge how stretched its short-term funding is, and spot early signs of strain when inventory or receivables start to build up. Cash credit (CC) →
Banker's lien
A banker's right to retain a customer's securities, cheques or other property that come into the bank's possession in the ordinary course of business, and to hold them against the customer's outstanding dues until those dues are cleared. Recognised as an implied general lien, it lets the bank refuse to release such items — and in some cases adjust them — where the customer owes money, without needing a separate agreement. Bankers rely on it as a built-in protection over instruments and assets that pass through their hands, distinct from a specific charge created by hypothecation or pledge over named collateral. Hypothecation →
Stock audit
An independent verification of the inventory and receivables a borrower has pledged or hypothecated as security for a working-capital limit, usually carried out periodically by an external auditor on the bank's behalf. The auditor physically checks that the stock exists, is in good condition and is valued correctly, and confirms that the drawing power claimed in the borrower's stock statements is genuine. Bankers use stock audits to guard against inflated statements, diversion of goods or double-financing, and to catch early signs of stress in a cash-credit or overdraft account before the security erodes. Stock statement →
Pari passu charge
An arrangement in which two or more lenders share the same security over a borrower's assets on an equal footing, ranking alike without any one of them having priority. If the borrower defaults and the security is sold, the proceeds are distributed among the pari-passu lenders in proportion to their outstanding dues rather than by order of who lent first. Bankers create pari-passu charges in consortium and multiple-banking arrangements so that each participating bank is treated fairly on the common collateral, as opposed to an exclusive or first/second charge that ranks one lender ahead of another. Consortium lending →
Fixed charge vs floating charge
Two ways a lender takes security over a borrower's assets. A fixed charge attaches to specific, identifiable assets — a particular machine, building or piece of land — which the borrower cannot sell or dispose of without the lender's consent. A floating charge hovers over a changing class of assets such as stock-in-trade or receivables that the borrower keeps trading in the ordinary course; it 'crystallises' into a fixed charge on a trigger such as default, fixing onto whatever assets exist at that moment. Bankers prefer fixed charges for their tighter control and stronger priority, and use floating charges where the underlying assets must keep moving, often combining both over a single borrower. Hypothecation →
Cash-flow based lending
An approach to credit appraisal where the lender sizes and structures a loan around the borrower's projected and historical cash flows — the actual money coming in and going out — rather than primarily around the collateral on offer. Repayment is matched to when the business is expected to generate surplus cash, and metrics such as the debt-service coverage ratio drive the decision. Bankers use cash-flow lending for businesses whose strength lies in steady receipts rather than hard assets, contrasting it with asset-based or security-led lending; it places the quality and reliability of cash generation, not the disposal value of collateral, at the centre of the credit. Debt Service Coverage Ratio (DSCR) →
Negative lien
An undertaking by a borrower not to create any charge, mortgage or encumbrance over specified assets, or not to sell or transfer them, without the lender's prior written consent — without the lender actually taking a charge over those assets itself. It is not security in the usual sense but a contractual restriction that keeps the borrower's assets unencumbered and available, so the lender's unsecured or pari-passu position is not quietly eroded by another creditor. Bankers commonly take a negative lien in clean or consortium facilities to preserve their standing, distinct from a positive charge created by hypothecation, pledge or mortgage. Pari passu charge →
Trust & Retention Account (TRA)
A specially structured bank account, common in project and infrastructure finance, into which all of a project’s revenues are first deposited and then released in a pre-agreed order of priority — the ‘waterfall’ — covering operating costs, statutory dues, debt service, reserve funding and only then distributions to the borrower. Operated by the lender or a trustee under a Trust and Retention Account agreement, it gives lenders visibility and control over project cash flows and ring-fences money for repayment before it can be diverted. Bankers use a TRA, alongside an escrow, so that debt service is met first out of the project’s own receipts. Escrow account →
Equitable vs registered mortgage
Two ways a borrower creates a mortgage over immovable property as security for a loan. An equitable mortgage — a mortgage by deposit of title deeds — is created simply by handing the original title documents to the lender with the intent to secure the debt, in notified towns, with little or no stamp duty and no registration: quick and low-cost, but resting on possession of the deeds. A registered mortgage is formally executed on a mortgage deed and recorded with the sub-registrar, attracting stamp duty and registration charges but giving a stronger, publicly recorded and more readily enforceable charge. Bankers choose between them by weighing cost and speed against the robustness of the security. Fixed charge vs floating charge →
Debt Service Reserve Account (DSRA)
A reserve account a borrower must fund and keep topped up — usually holding one or more upcoming instalments of principal and interest — so the lender can still be paid on time if the project or business hits a temporary cash shortfall. Held with the lending bank or a trustee and replenished after any draw, it acts as a cushion that smooths repayment in project and term finance and is a standard covenant in infrastructure loans. Bankers size the DSRA against the debt-service profile and watch it as an early sign of stress when the borrower struggles to keep it topped up. Debt Service Coverage Ratio (DSCR) →
Channel financing
A structured working-capital arrangement in which a bank finances the dealers or vendors in a large company’s supply chain against invoices linked to that anchor corporate, using the anchor’s strength to extend cheaper, faster credit down the chain. In dealer financing the bank funds a distributor’s purchases so the anchor is paid upfront while the dealer gets time to sell; in vendor financing the bank discounts a supplier’s receivables on the anchor. Bankers value channel financing because the anchor relationship lowers risk and opens a whole network of smaller borrowers, and it differs from a standalone cash-credit limit because it is tied to the trade flow around one anchor. Bill discounting →
Supply chain finance
An umbrella set of techniques that fund the gap between a buyer’s payment terms and a supplier’s need for cash along a trade chain, typically by letting suppliers be paid early on approved invoices at a financing cost linked to the stronger buyer’s credit. It spans approved-payables (reverse factoring), receivables discounting and dynamic discounting, and in India often runs over the regulated TReDS platform for MSME receivables. Bankers use supply chain finance to improve a supplier’s liquidity without adding debt to its own balance sheet while giving the buyer room to manage its payment terms, making the whole chain more resilient. TReDS →
Interest subvention
A government scheme in which the state bears part of the interest on certain loans, so the borrower pays a lower effective rate while the bank still earns its normal yield and claims the difference as a subvention from the government. It is used to make credit cheaper for policy-priority segments such as short-term crop loans, exports or specified small businesses, and the relief is often paired with an extra rebate for prompt repayment. Bankers must apply the eligible loans at the scheme’s terms, fund them at the normal rate and reconcile the government’s reimbursement, keeping eligibility and documentation conditions exactly, since the benefit can be recovered if those conditions are breached. Priority Sector Lending (PSL) →
Ad-hoc limit
A short, temporary credit limit a bank sanctions over and above a borrower's regular working-capital limit to meet a sudden but genuine need — a bunched-up order, a tax payment, a delayed receivable — until the next review. It is approved for a fixed short period at the bank's discretion, often priced higher, and is expected to be regularised or repaid quickly rather than becoming a permanent enhancement. Bankers use ad-hoc limits to keep a sound account running through a temporary bulge without reopening the full assessment, while watching that repeated ad-hocs are not quietly masking an under-assessed limit or early stress. Drawing Power (DP) →
Working Capital Demand Loan (WCDL)
A portion of a borrower's working-capital limit carved out and given as a separate short-tenor demand loan rather than as a fluctuating cash-credit balance. The borrower draws a fixed amount for a set period and the bank can recall it on demand, which gives the bank firmer control over the funded portion and lets it price that slice distinctly. Bankers commonly split a large working-capital facility into a cash-credit component for day-to-day swings and a WCDL component for the stable core need, improving discipline over how the limit is actually used. Cash credit (CC) →
Temporary Overdraft (TOD)
A one-off permission a bank gives to let an account be overdrawn beyond its sanctioned limit — or a clean overdraft in an account with no regular limit — for a very short period to honour an urgent payment or cheque. It is granted case by case at the bank's discretion, usually carries higher charges, and is meant to be cleared within days. Bankers allow a TOD to avoid bouncing an important instrument for an otherwise sound customer, but track such excesses closely because frequent or unadjusted TODs signal liquidity stress and have to be reported as an irregularity. Overdraft →
Devolvement
When a bank's contingent liability under a letter of credit or bank guarantee turns into a real, funded advance because the underlying obligation was not met. If the LC-opening bank's customer fails to pay on the due date the bank must still honour the documents to the beneficiary, and the unpaid amount 'devolves' on the customer as a debit to their account; similarly a guarantee that is invoked devolves when the bank pays the beneficiary. Bankers watch devolvement closely because an off-balance-sheet exposure has suddenly become a funded, often irregular, advance — frequent devolvements signal that the customer's cash flows are not matching their trade commitments and the account may be slipping toward stress. Letter of credit (LC) →
Bills purchase
A form of trade finance where the bank buys a borrower's outstanding bill or invoice outright and pays them upfront, instead of waiting for the buyer to pay on the due date. For a sight or demand bill (payable on presentation) bankers speak of 'purchase'; for a usance bill (payable after a fixed period) of 'discounting' — in both the bank takes the bill, gives immediate funds net of its charges, and collects from the drawee at maturity. It converts a receivable into cash for the seller and is assessed on the strength of the underlying trade and the parties, usually with recourse to the borrower if the bill is not finally paid. Bill discounting →
Book debts
The money a business is owed by its customers for goods or services already supplied — its trade receivables or sundry debtors. Book debts are a core current asset that banks finance and take as security for working-capital limits, typically by hypothecation, with the funded portion governed by the drawing power after applying a margin and excluding debts that are too old or due from associate concerns. Bankers rely on periodic statements of book debts and stock to size the drawing power, and treat a rising stock of stale or stretched debtors as an early warning that sales are not converting into cash. Drawing Power (DP) →
Forfaiting
The without-recourse purchase by a bank or specialised financier of an exporter's medium-to-long-term receivables — typically bills of exchange or promissory notes backed by an importer's bank guarantee or aval. The exporter is paid upfront in cash and walks away with no further liability: the forfaiter takes on the full credit, country and currency risk of collecting from the overseas buyer. It differs from factoring in that it covers single, large, longer-dated capital-goods transactions rather than a revolving book of short-term invoices, and it is always non-recourse. Bankers use it to let exporters convert deferred-payment export deals into immediate, risk-free liquidity. Factoring →
Buyer's credit
Short-term financing arranged for an importer to pay an overseas supplier at sight, with the loan extended by an overseas bank or financial institution against a guarantee (a letter of undertaking or letter of comfort) from the importer's own bank. The importer effectively gets to defer payment and benefit from cheaper foreign-currency funding, while the supplier is paid immediately. It is distinct from supplier's credit, where the exporter itself extends the deferred-payment terms. Buyers' credit is a common trade-finance tool for funding imports, and the guaranteeing bank carries the contingent exposure until the importer settles. Letter of Credit (LC) →
Back-to-back letter of credit
An arrangement in which an intermediary or trader uses an export letter of credit received from its end-buyer as security to get its own bank to open a second, matching letter of credit in favour of the actual supplier. The two credits are linked 'back to back': proceeds from the first are intended to settle the second. It lets a middleman finance a deal without using its own funds and without revealing the end-buyer and the supplier to each other. Banks treat it cautiously because the two LCs must be carefully matched on amount, tenor and documents, and the intermediary's repayment depends entirely on the underlying export credit performing. Letter of Credit (LC) →
Demand Promissory Note (DP Note)
A short written promise, signed by the borrower, to repay the loan amount to the bank on demand together with interest. It is one of the core security documents a banker takes when a credit facility is sanctioned: by making the debt payable 'on demand', it lets the bank call up the dues at any time and gives a clean, self-contained instrument to rely on if recovery is ever needed. Because it is a negotiable instrument, bankers are careful about how it is drawn, stamped and kept alive over the life of the facility, and they periodically obtain a fresh acknowledgement of debt so the document does not become time-barred. Negotiable instrument →
Registration of Charge
The formal step of recording, on a public register, that a bank holds security over a borrower's assets — so the bank's claim is visible to the world and ranks ahead of later lenders. For company borrowers the charge is filed with the Registrar of Companies; for security interests over property and receivables it is filed with the central registry CERSAI. Registering the charge perfects the bank's security: it establishes priority, warns other lenders that the asset is already encumbered, and is essential if the bank later needs to enforce against the asset. Bankers treat timely, correct charge registration (and its satisfaction once the loan is repaid) as a basic discipline of secured lending. CERSAI →
Diversion and siphoning of funds
Two related forms of misuse of borrowed money that bankers watch for. Diversion means the borrower uses funds for a purpose other than the one the loan was sanctioned for — for example, routing working-capital money into unrelated investments or repaying other liabilities. Siphoning is more serious: funds are taken out of the business in ways that harm the company's financial health, often to related parties, with no genuine business rationale. Both are central to how lenders judge whether a default was wilful, and detecting them through end-use monitoring, stock statements and account conduct is a key part of credit supervision and the wilful-defaulter assessment. Wilful defaulter →
Transfer of Loan Exposures
The RBI framework, consolidated in the Master Direction - Transfer of Loan Exposures, 2021, that governs how a lender may sell or transfer a loan it holds to another eligible lender. It covers both standard (performing) loans - sold through assignment, novation or a loan-participation route, including Direct Assignment of a loan pool and co-lending sell-downs - and stressed loans, which may be transferred to banks, NBFCs or Asset Reconstruction Companies. The framework prescribes who may buy, a Minimum Holding Period before a standard loan can be sold, swiss-challenge price discovery for larger stressed-loan sales, and disclosure and accounting requirements, so that risk leaves the books of the originator in a transparent, arm-length way. Co-pilot: Direct Assignment scenario →
Minimum Retention Requirement (MRR)
The skin-in-the-game rule in the RBI securitisation framework requiring the originator of a securitisation to retain a minimum economic interest in the pool of loans it has securitised, rather than selling 100% of the risk to investors. By keeping a slice of the exposure on its own books, the originator stays incentivised to underwrite and monitor the loans properly. MRR is usually expressed as a percentage of the book value of the securitised pool and works alongside the Minimum Holding Period (MHP), which sets how long the originator must have held the loans before they can be securitised. Both are central to structuring a compliant securitisation of standard assets. Co-pilot: Direct Assignment (MRR & MHP) →
Swiss-challenge auction
A two-stage, transparent price-discovery method used when a lender sells a stressed (typically NPA) loan, for example to an Asset Reconstruction Company. The seller first obtains a base bid from one interested buyer, then publicly invites counter-bids (challengers) to better that price within a set window; the original bidder usually gets a right to match the best challenge. The aim is to test whether the first offer is fair and to maximise recovery for the selling bank in an auditable way. The RBI transfer-of-loan-exposures framework expects swiss-challenge or similar competitive price discovery above prescribed thresholds for stressed-loan sales. Co-pilot: ARC stressed-asset sale →
Credit Conversion Factor (CCF)
The percentage used to translate an off-balance-sheet, non-fund-based exposure — a bank guarantee, a letter of credit, an undrawn commitment — into a credit-equivalent on-balance-sheet amount, so the bank can hold capital against it. A high-risk item such as a financial guarantee attracts a 100% CCF (treated like a funded loan for capital), while lower-risk or short-tenor items carry smaller factors. Bankers use the CCF to work out how much capital a non-fund-based limit really consumes, which is why a large LC line can quietly use up as much capital as a term loan. LC / BG worked scenario →
Counter-indemnity
The written undertaking a customer gives its bank, agreeing to reimburse the bank in full — with interest and costs — if the bank has to pay out under a guarantee it issued or a letter of credit it opened on the customer's behalf. Because a bank guarantee or LC commits the bank's own money to a third party, the counter-indemnity is what lets the bank recover from its customer once the contingent liability crystallises into a funded debt. It is taken at sanction, alongside <a href="/glossary/#margin-money">margin money</a> and any security, and is a standard condition of every non-fund-based facility. LC / BG worked scenario →
Co-acceptance of bills
A non-fund-based facility in which a bank adds its own acceptance to a bill of exchange drawn on its customer, promising to pay the holder on the due date if the customer does not. It turns the customer's trade bill into bank-backed paper that suppliers and discounting banks will accept, much like a guarantee of payment. The RBI groups it with guarantees — the relevant rulebook is the Master Circular on Guarantees and Co-acceptances — because, like a <a href="/glossary/#bank-guarantee">bank guarantee</a>, an honoured co-acceptance can devolve into a funded advance, so banks sanction it with the same margin, counter-indemnity and exposure discipline. Department of Regulation rulebook →
Consortium lending / Multiple banking
When a borrower's credit needs are too large or too risky for a single bank, several banks join together to share the exposure. Under a consortium the lenders formally tie up under a common agreement with a lead bank that appraises the proposal, sets shared terms and coordinates monitoring, while each member funds an agreed share. The looser cousin is multiple banking, where a borrower simply runs separate limits with several banks that have no common arrangement. In both, lenders are expected to exchange information on the borrower's account conduct and report large exposures, so that no single bank is blindsided and the total credit to the borrower stays visible across the system. Bankers weigh consortium or multiple-banking structures whenever a <a href="/glossary/#working-capital">working-capital</a> or term limit outgrows one lender's appetite. Working capital →
Inter-Bank Participation Certificate (IBPC)
A money-market instrument one bank issues to another to let it take a share in an advance the first bank has already made, without the underlying loan leaving the originating bank's relationship with the borrower. It comes in two flavours: a risk-sharing variety, where the participating bank takes on a portion of the credit risk on a standard advance, and a non-risk-sharing variety used mainly to even out short-term liquidity. Banks use IBPCs to manage their credit-deposit position, deploy surplus funds, or adjust their <a href="/glossary/#psl">priority-sector</a> standing, since a risk-sharing participation in eligible loans can shift where the exposure is counted. The precise tenor, eligibility and accounting treatment are set by the RBI's framework, which bankers consult before issuing or buying a certificate. Priority-sector lending (PSL) →
Authorised Dealer (AD) bank
A bank or institution licensed by the RBI under the Foreign Exchange Management Act to deal in foreign exchange and handle cross-border transactions for customers — opening <a href="/glossary/#nre-nro-fcnr">NRE/NRO/FCNR</a> accounts, executing remittances under the <a href="/glossary/#lrs">Liberalised Remittance Scheme</a>, processing trade payments and reporting forex flows to the regulator. AD Category-I banks carry the widest powers across the current and capital account, while narrower categories handle a limited set of activities such as money-changing. Because every legitimate foreign-exchange dealing in India must route through an authorised dealer, the AD bank is the front-line enforcer of <a href="/glossary/#fema">FEMA</a> compliance, checking the purpose of each transaction against the rules before it is allowed. FEMA →
Banker's lien & right of set-off
Two everyday recovery rights a banker leans on when a borrower's account turns sour. A banker's lien is the right to retain a customer's securities, instruments or goods that have come into the bank's possession in the ordinary course of business until the customer's dues are cleared — a general lien that extends across the relationship, not just the single transaction. The right of set-off lets the bank combine accounts the customer holds with it, applying a credit balance in one account against a debit (overdue) balance in another, once the debt is due and proper notice is given. Both are exercised within the limits of the bank-customer contract and the law, and bankers invoke them carefully alongside formal <a href="/glossary/#collateral">collateral</a> before escalating to harder enforcement. They are first-line tools precisely because they need no court order, only a clean legal basis and correct documentation. Collateral →
Out of Order (OD/CC account)
A status flag for an overdraft or cash-credit account that signals the borrower has stopped operating the limit healthily. An account is treated as out of order when the outstanding balance stays continuously over the sanctioned limit or drawing power, or when — even within the limit — there are no credits for a stretch, or the credits that do come in are not enough to cover the interest debited during the period. Once an account is out of order for long enough, it becomes a trigger point on the path from a <a href="/glossary/#sma">Special Mention Account</a> to a non-performing asset, so bankers watch operating conduct, not just the limit, when judging the health of working-capital lines. The idea is that a genuinely working account churns — money flows in and out — whereas an out-of-order account has quietly become a stuck, hardcore debt. Special Mention Account (SMA) →
Techno-Economic Viability (TEV) study
An independent appraisal that asks whether a large project loan can actually be built and repaid before a bank commits. The technical leg examines whether the project is sound to construct and run — technology, capacity, location, raw-material tie-ups, implementation schedule and execution risk — while the economic leg tests whether the numbers hold up, stress-testing the demand assumptions, cost estimates, projected cash flows and the resulting <a href="/glossary/#dscr">debt-service coverage</a> under adverse scenarios. Banks commission a TEV study (often from a specialist agency) for big infrastructure and industrial proposals so the lending decision rests on a hard, third-party view of viability rather than the promoter's own optimism. A weak TEV finding can reshape the loan structure — lower gearing, more promoter contribution, tighter covenants — or stop the proposal altogether. DSCR →
Net Working Capital (NWC) / Promoter's margin
The borrower's own long-term stake in funding its day-to-day operations — current assets minus current liabilities — and the cushion a banker insists on before lending against stock and receivables. When a bank sizes a <a href=\"/glossary/#working-capital\">working-capital</a> limit it does not fund the whole current-asset gap: it expects the promoter to bring a margin (the net working capital) so that the borrower has skin in the game and the bank's <a href=\"/glossary/#drawing-power\">drawing power</a> is calculated on stocks and <a href=\"/glossary/#book-debts\">book debts</a> net of that margin and of trade creditors. A healthy, positive NWC signals that long-term sources are comfortably financing short-term needs; a thin or negative NWC is an early warning that the borrower is funding current assets with short-term money, which bankers probe during renewal and stock inspection. Working capital →
No Objection Certificate (NOC)
A short written confirmation from a lender that it has no objection to a specified act by the borrower — most commonly issued on full and final repayment of a loan, confirming the account is closed and the bank's charge over the asset can be released. After a <a href=\"/glossary/#term-loan\">term loan</a> or vehicle/home loan is cleared, the NOC (and the linked release of the <a href=\"/glossary/#roc-charge\">registered charge</a> or hypothecation) is what lets the borrower sell or re-mortgage the asset cleanly and get the lien removed from official records. NOCs are also issued mid-relationship — for instance to let a borrower create a second charge in favour of another lender, take additional finance, or transfer the loan elsewhere. Because an NOC can waive the bank's rights, it is granted only after dues are verified and the appropriate approval is in place. Charge / ROC registration →
Foreclosure / Prepayment (and prepayment charges)
Repaying a loan in full (foreclosure) or in part (prepayment) ahead of its scheduled tenor, and the fee a lender may levy for it. Closing a loan early saves the borrower future interest but can disturb the lender's expected return and asset-liability planning, so contracts have historically allowed a prepayment or foreclosure charge calculated on the amount prepaid. A key banker-native nuance is that, under RBI rules, this charge generally cannot be levied on floating-rate term loans taken by individuals for non-business purposes — for example a floating-rate <a href=\"/glossary/#eblr\">EBLR</a>-linked home loan — whereas fixed-rate loans and many business loans may still attract a charge as per the sanction terms disclosed in the <a href=\"/glossary/#kfs\">Key Facts Statement</a>. Bankers quote the applicable foreclosure terms upfront so the borrower can weigh the interest saved against any charge. EBLR (external benchmark) →
Hypothecation vs Pledge vs Mortgage
Three ways a bank takes <a href='/glossary/#collateral'>collateral</a> over an asset, distinguished by who holds the asset and what kind of asset it is. In <b>hypothecation</b> the borrower keeps possession of moving assets such as stock-in-trade, vehicles or <a href='/glossary/#cash-credit'>cash-credit</a> inventory while the bank holds a charge over them — common in working-capital and vehicle finance, where the bank can seize the asset on default. In a <b>pledge</b> the bank (or its agent) takes actual or constructive possession of movable goods or securities — for example warehouse-receipt or gold pledges — and returns them only on repayment. A <b>mortgage</b> is a charge over immovable property (land and buildings); an equitable mortgage created by depositing title deeds is the everyday form for home loans and loans against property. Knowing which one applies tells a banker how the security is held, how it is enforced, and what registration (such as a <a href='/glossary/#roc-charge'>ROC charge</a>) is needed. Collateral / security →
Days Past Due (DPD) / DPD bucket
The number of days an instalment or dues have remained unpaid past their due date — the raw counter behind a loan's classification. Bankers group accounts into DPD buckets (0, 1–30, 31–60, 61–90 and 90+) because the bucket drives both early-warning action and regulatory status: an account overdue for more than 30 days slips into the Special Mention Account <a href='/glossary/#sma'>SMA</a>-1/SMA-2 stages, and once principal or interest stays overdue beyond 90 days the account is classified as a <a href='/glossary/#gnpa'>non-performing asset</a>. Because RBI's daily, end-of-day NPA recognition keys off this counter, even a single day's slippage moves the DPD — so collections teams watch the buckets closely and act before the 90-day line. DPD is also what credit bureaus report, so a borrower's DPD history shapes future loan eligibility. SMA (Special Mention Account) →
Interest Subvention
A government-funded rebate that lowers the effective interest a borrower pays, with the lender reimbursed for the difference so its own margin is protected. Under a subvention scheme the bank lends at its normal rate — typically an <a href='/glossary/#eblr'>EBLR</a>- or MCLR-linked rate — but the borrower is charged a concessional rate, and the Centre (or a state) pays the gap to the bank, often with an extra rebate for prompt repayment. The best-known examples are the short-term crop-loan / Kisan Credit Card subvention and various MSME and export-credit schemes, all aimed at channelling affordable credit to priority segments. For a banker the key points are operational: the concession is a fiscal subsidy, not a cut in the bank's yield; it is claimed from the government on defined terms; and it applies only to eligible borrowers and loan amounts, so correct tagging and timely claims matter. EBLR (external benchmark) →
Stock statement & Stock audit
A periodic return a working-capital borrower submits to its bank listing the value of stock (raw material, work-in-progress, finished goods) and book debts held as security, usually each month. The bank applies an agreed margin to the eligible figure to fix the <a href="/glossary/#drawing-power">drawing power</a> — the live ceiling up to which the borrower may draw on a <a href="/glossary/#cash-credit">cash-credit</a> limit — so a stale or inflated statement directly distorts how much can be drawn. A stock audit is the independent, periodic physical verification of that security (often by an external chartered accountant or valuer) to confirm the stock actually exists, is owned by the borrower, is not double-financed and is correctly valued. Banks order stock audits routinely on larger limits and as an early-warning step when an account shows stress, since overstated stock is a classic route to <a href="/glossary/#diversion-siphoning">diversion of funds</a>. Drawing power →
Ad-hoc / Additional limit
A short-term, temporary credit limit a bank sanctions over and above a borrower's regular working-capital facility to meet a sudden, genuine spike in need — a bulk order, a seasonal bulge or a delayed receivable. It is granted for a defined short window (commonly a few months), usually carries a higher rate of interest and stricter conditions, and is expected to be regularised or vacated by the next renewal rather than rolled over indefinitely. Because an ad-hoc limit is, by design, an exception, repeated or long-standing ad-hocs are a recognised early-warning sign that the sanctioned <a href="/glossary/#working-capital">working-capital</a> assessment has fallen short of the borrower's real cycle and the <a href="/glossary/#cash-credit">cash-credit</a> limit may need a proper review. Working capital →
Cash budget method of assessment
A way of sizing a borrower's working-capital limit by projecting the actual month-by-month cash inflows and outflows of the business and funding the peak shortfall, rather than applying a flat formula to projected turnover. Banks favour it for businesses whose needs are lumpy or seasonal — sugar, tea, construction, software services, large project work — where a smoothed turnover-based estimate would either starve the borrower at the peak or over-finance it in the trough. The borrower submits a forward cash budget; the bank funds the gap between expected receipts and payments at the tightest point, and monitors actuals against the budget. It contrasts with the turnover-linked <a href="/glossary/#mpbf">MPBF / permissible-bank-finance</a> approach and, like all working-capital assessment, ties back to the live <a href="/glossary/#drawing-power">drawing power</a> the borrower may actually use. MPBF →
Usance bill (tenor / time bill)
A <a href='/glossary/#negotiable-instrument'>bill of exchange</a> payable a fixed period after sight or after date — its 'usance' or tenor — rather than on demand. Where a sight (or demand) bill must be paid the moment it is presented, a usance bill gives the drawee an agreed credit period (say 30, 60 or 90 days) before payment falls due, which is how trade credit is built into the instrument itself. The drawee 'accepts' the bill, undertaking to pay on the due date, and bankers can then <a href='/glossary/#bill-discounting'>discount</a> the accepted bill to give the seller funds upfront against that future payment. For a banker the tenor sets when money comes in and how the exposure is priced, and an unpaid usance bill on maturity is what triggers <a href='/glossary/#devolvement'>devolvement</a> onto the party the bank financed. Bill discounting →
Drawing against Uncleared Effects (DAUE)
Allowing a customer to withdraw funds against cheques or other instruments that have been deposited but not yet realised — in effect lending against the <a href='/glossary/#float'>float</a> until the instrument clears. Because the money has not actually reached the bank, a DAUE drawing is an unsecured, short-lived credit risk: if the deposited cheque bounces, the customer's account is left overdrawn. Bankers therefore permit DAUE only selectively, against instruments of established standing customers, within a sanctioned limit and a sublimit, and watch it closely — unlike a routine clearing credit, which is given only once funds are realised. It is distinct from a formal <a href='/glossary/#overdraft'>overdraft</a> in that it is tied specifically to instruments in the course of collection. Float →
Substitution / release of security
Replacing one item of <a href='/glossary/#collateral'>collateral</a> charged to the bank with another of at least equivalent value, or releasing a charged asset, during the life of a loan — done only with the bank's consent and proper documentation. A borrower may want to sell a mortgaged property, swap pledged securities, or free up an asset, and the bank agrees only after satisfying itself that the cover and its <a href='/glossary/#ltv'>loan-to-value</a> margin are preserved, the new security is perfected (a fresh charge created and the old one released on official records via the relevant <a href='/glossary/#roc-charge'>charge / ROC registration</a>), and any <a href='/glossary/#noc-loan'>NOC</a> conditions are met. Bankers treat substitution as a controlled exception rather than a right, because a poorly handled release can quietly erode the security backing the exposure. Collateral / security →
Crystallisation of a floating charge
The moment a bank's floating charge over a borrower's changing pool of assets — typically the stock-in-trade and receivables financed by <a href='/glossary/#cash-credit'>cash credit</a> and secured by <a href='/glossary/#hypothecation'>hypothecation</a> — stops 'floating' and fixes onto whatever assets exist at that instant. While the charge floats, the borrower may buy, sell and replace those assets in the ordinary course of business without the bank's specific consent; on crystallisation the borrower loses that freedom and the bank's claim attaches to the identified assets. Crystallisation is triggered by defined events — the borrower defaulting and the bank enforcing, the borrower ceasing to trade, winding-up or insolvency commencing, or a notice the charge document provides for. For a banker it matters because the strength of a hypothecation security is only realised at crystallisation: the earlier the charge fixes and the cleaner the <a href='/glossary/#roc-charge'>charge / ROC registration</a>, the better the bank's standing against other claimants on the same stock. Hypothecation →
Lien-marked / pledged deposit (lien on FD)
A <a href='/glossary/#fixed-deposit'>fixed deposit</a> (or other deposit) on which the bank has placed a hold so that it cannot be withdrawn or prematurely closed without the bank's release, because it stands as security for a credit facility — for example an overdraft against the FD, a <a href='/glossary/#bank-guarantee'>bank guarantee</a> backed by margin, or a loan where the deposit is the collateral. The bank 'marks a lien' in its core system; the depositor still earns interest on the FD, but the amount is effectively frozen as cover. This differs from a routine deposit, which the customer can break at will, and from the bank's general <a href='/glossary/#banker-lien'>banker's lien</a>, which is a background right rather than a specific recorded hold. For a banker a lien-marked deposit is among the cleanest forms of security — self-liquidating and within the bank's own control — which is why facilities fully covered by it attract the lightest scrutiny and pricing. Fixed deposit →
Pari passu charge
A security arrangement where two or more lenders share a charge over the same assets 'pari passu' — on an equal footing — so that, on enforcement, each ranks proportionately to its outstanding rather than one taking priority over another. It is the standard structure in <a href='/glossary/#consortium-lending'>consortium</a> and <a href='/glossary/#multiple-banking'>multiple-banking</a> arrangements and in <a href='/glossary/#working-capital'>working-capital</a> financing of a common stock-and-receivables pool: recoveries from the shared <a href='/glossary/#collateral'>collateral</a> are divided in the ratio of each bank's exposure. It contrasts with an exclusive charge (one lender alone) and with a ranked structure of first and <a href='/glossary/#second-charge'>second charge</a>, where the junior lender is paid only after the senior is made whole. For a banker, joining a pari passu charge means agreeing to share security and signing an inter-se / pari passu letter, and the discipline of registering the shared <a href='/glossary/#roc-charge'>charge with the ROC</a> is what makes the equal ranking enforceable. Consortium lending →
Net Owned Funds (NOF)
A regulatory measure of a finance company's own capital, used by RBI as the entry and continuance threshold for <a href='/glossary/#nbfc'>NBFCs</a> and certain other entities. It starts from owned funds — paid-up equity, free reserves and certain balances, less accumulated losses, deferred revenue expenditure and other intangible items — and then deducts, beyond a small limit, the company's investments in and loans to its own group and subsidiary companies. The second step is what makes it 'net': it strips out capital that is really just recycled within the group so the figure reflects genuinely independent net worth. RBI prescribes a minimum NOF an NBFC must hold to register and to keep operating, and it anchors several exposure and acceptance-of-deposit limits. For a banker assessing an NBFC counterparty or co-lending partner, NOF is the cleanest read on whether the entity has real, unencumbered capital standing behind its book, as distinct from headline <a href='/glossary/#tier-capital'>tier capital</a> ratios. NBFC →
Contingent liability
An obligation that does not sit on the bank's books as a funded asset today but could crystallise into an actual payment if a future event occurs — most importantly the bank's <a href='/glossary/#non-fund-based'>non-fund-based</a> exposures such as <a href='/glossary/#bank-guarantee'>bank guarantees</a>, <a href='/glossary/#letter-of-credit'>letters of credit</a> and acceptances, where the bank pays only if its customer defaults on the underlying obligation. It is carried 'below the line' and disclosed rather than booked as a loan, but it carries real credit risk: on <a href='/glossary/#devolvement'>devolvement</a> a contingent liability becomes a funded advance overnight. Bankers therefore appraise guarantee and LC limits with the same rigour as funded facilities, take margin and <a href='/glossary/#collateral'>collateral</a>, and apply a credit-conversion factor so that the off-balance-sheet exposure is reflected in capital. The discipline matters because a portfolio that looks lightly funded can still hold heavy embedded risk through its contingent book. Non-fund-based limit →
Cross-default clause
A loan covenant under which a borrower is treated as being in default to one lender the moment it defaults on a different debt — to that same bank under another facility, or to an outside lender — even if the facility carrying the clause is itself being serviced on time. Its purpose is to stop a stressed borrower from selectively paying some lenders while letting others slip: the trigger lets the bank call up its loan, freeze drawings or step into a <a href='/glossary/#resolution-plan'>resolution</a> at the same time as everyone else rather than waiting to be the last one paid. It is the bilateral cousin of the equal-ranking idea behind a <a href='/glossary/#pari-passu-charge'>pari passu charge</a> and is standard in <a href='/glossary/#term-loan'>term-loan</a> and consortium documentation set out in the <a href='/glossary/#sanction-letter'>sanction letter</a>. For a banker it is a key early-warning and enforcement lever, though it is drafted with thresholds and cure periods so that a trivial or disputed default elsewhere does not needlessly unravel an otherwise healthy account. Sanction letter →
Subordinated debt (Tier-2 bonds)
Borrowing that ranks below a bank's depositors and ordinary creditors in the queue for repayment if the bank is wound up — it is paid only after everyone senior has been made whole, which is exactly why regulators let banks count qualifying long-tenor subordinated bonds toward <a href='/glossary/#tier-capital'>Tier-2 capital</a> under the <a href='/glossary/#basel-iii'>Basel III</a> framework. Because the lender accepts this junior position and a long lock-in, subordinated debt pays a higher coupon than senior bonds but absorbs losses ahead of them, sitting between pure equity and senior debt on the risk ladder. It lets a bank thicken its regulatory capital and support its <a href='/glossary/#crar'>capital-adequacy ratio</a> without diluting shareholders the way a fresh equity issue would, though supervisors discount its capital value as it nears maturity and may require loss-absorption or write-down features. For a banker reading a counterparty's balance sheet, the size and terms of subordinated debt signal how much of the capital cushion is genuine equity versus instruments that only behave like capital under stress. Tier capital →
Trust and Retention Account (TRA)
A tightly controlled cash-flow account, common in project and infrastructure finance, into which all of a borrower's project revenues are mandatorily routed and then released only in a pre-agreed order of priority — the 'waterfall'. Operating costs, taxes, lender interest and principal, the <a href='/glossary/#dsra'>Debt Service Reserve Account</a> top-up and only finally distributions to the promoter are each paid in sequence, so lenders are served before cash can leak out to owners. It is a stronger cousin of a simple <a href='/glossary/#escrow-account'>escrow account</a>: the funds are held in trust and the bank or a trustee, not the borrower, operates the account under the financing documents, giving lenders real-time visibility and a structural grip on the project's cash. By trapping revenue at source and enforcing the <a href='/glossary/#escrow-mechanism'>escrow-style</a> waterfall, a TRA reduces the risk that cash is diverted before debt is serviced, which is why it is a near-standard condition in <a href='/glossary/#term-loan'>term-loan</a> and consortium financing of long-gestation projects. Escrow account →
Promoter's contribution (margin money)
The slice of a project's or asset's cost that the borrower's owners must fund from their own resources before the bank releases its loan — the equity the promoter brings to the table so that lenders are not the only ones with money at risk. By insisting on this margin, a bank ensures the borrower has genuine 'skin in the game': owners who have committed real capital are far less likely to walk away, divert funds, or treat the venture casually, which is why the size and source of promoter contribution is a core credit covenant in <a href='/glossary/#term-loan'>term-loan</a> and project financing. The contribution is normally brought in up-front or pari passu with bank <a href='/glossary/#dsra'>disbursement</a>, not back-ended, and lenders scrutinise that it is real equity rather than other borrowed money dressed up as capital. A thin or fabricated promoter contribution inflates leverage, weakens the cushion that absorbs early losses, and is a classic early warning that a proposal is being over-financed. Term loan →
End-use monitoring
The bank's ongoing discipline of verifying that borrowed money is actually spent on the purpose for which it was sanctioned — that a <a href='/glossary/#term-loan'>term loan</a> for plant and machinery buys plant and machinery, and working-capital limits fund the operating cycle rather than being parked, lent on, or routed into unrelated ventures. It runs through the life of the exposure: certified invoices and statutory auditors' certificates at <a href='/glossary/#dsra'>disbursement</a>, inspection of assets created, and periodic checks such as the <a href='/glossary/#stock-statement'>stock statement</a> and book-debt statements for working-capital accounts. End-use monitoring is the practical defence against <a href='/glossary/#diversion-siphoning'>diversion and siphoning</a> of funds, and a documented failure of end-use is one of the central grounds on which a borrower can be classified a <a href='/glossary/#wilful-defaulter'>wilful defaulter</a>. For a banker it converts a one-time credit decision into continuous control: lending is not only about whom you lend to, but proving the money did what the sanction said it would. Diversion / siphoning →
Moratorium (gestation period)
An agreed initial stretch of a loan's life during which the borrower is excused from repaying principal — and sometimes interest too — because the financed activity has not yet started generating cash. It mirrors the project's gestation: a factory under construction or an infrastructure asset being built earns nothing until it is commissioned, so a sensibly structured <a href='/glossary/#term-loan'>term loan</a> defers principal instalments until commercial operations begin and cash flows can actually service the debt. Where even interest is deferred, the unpaid interest is usually capitalised into the loan, raising the outstanding the borrower must later repay. The length of the moratorium is set against realistic project timelines and stress-tested through the <a href='/glossary/#dscr'>debt service coverage ratio</a>, because too short a moratorium starves a young project of cash while too long a one masks trouble and back-loads repayment risk. Lenders frequently pair it with a <a href='/glossary/#dsra'>Debt Service Reserve Account</a> so the first few post-moratorium instalments are pre-funded. DSCR →
Education loan
A retail term loan that funds a student's higher studies - tuition and examination fees, hostel and reasonable living costs, books, equipment and other course-related expenses - usually sanctioned with a parent or guardian as co-borrower and structured under the model education-loan scheme rather than as an ordinary <a href='/glossary/#term-loan'>term loan</a>. It is a <a href='/glossary/#psl'>priority-sector (education)</a> exposure, so it carries features an ordinary personal loan does not: the loan is sized on the full cost of the course with a prescribed borrower's margin on the higher slabs and disbursed in stages aligned to each semester or year; up to a regulator-prescribed ceiling it is sanctioned collateral-free (the co-obligation of the parent apart), with a credit-guarantee fund standing in for security on eligible loans. Pricing is linked to the bank's <a href='/glossary/#eblr'>external benchmark lending rate (EBLR)</a>, and eligible borrowers receive a central <a href='/glossary/#interest-subvention'>interest subvention</a> that lowers the effective cost. A defining feature is the <a href='/glossary/#moratorium-period'>moratorium</a> - repayment is deferred through the course period plus a grace period, because a student earns nothing while studying - after which equated instalments begin and the account is monitored from the repayment-commencement date, slipping to NPA under the <a href='/glossary/#irac'>IRAC</a> norms if not serviced. For a banker it sits at the intersection of social-priority lending and ordinary credit discipline: generous on security and timing up front, but governed by the same income-recognition and asset-classification rules once repayment is due. Priority-sector lending →
Financial guarantee
A <a href='/glossary/#bank-guarantee'>bank guarantee</a> under which the bank promises to pay a sum of money if its customer fails to meet a financial obligation - repaying an advance, honouring a deferred payment, meeting a tax or duty liability, or settling dues to a supplier. It is one of the two broad families of guarantees a banker issues; unlike a <a href='/glossary/#performance-guarantee'>performance guarantee</a>, which underwrites how well a job is done, a financial guarantee underwrites that money will actually be paid. Because the bank is standing behind a pure payment promise, it is treated as a credit-substitute carrying the full risk weight of a funded loan, and it is a <a href='/glossary/#non-fund-based'>non-fund-based</a> exposure only until it is invoked - on invocation it <a href='/glossary/#devolvement'>devolves</a> into a hard funded liability that the customer must reimburse. A banker assesses a financial guarantee with the same rigour as a term loan: the obligor's capacity to pay, adequate margin and counter-indemnity, and a defined expiry and claim period. Bank guarantee →
Performance guarantee
A <a href='/glossary/#bank-guarantee'>bank guarantee</a> under which the bank promises to compensate the beneficiary if its customer fails to perform a contractual obligation to an agreed standard or timeline - typically a contractor who does not complete works, supply goods, or meet quality and delivery terms. It is the counterpart to a <a href='/glossary/#financial-guarantee'>financial guarantee</a>: here the bank is not underwriting a fixed debt but the customer's ability to deliver, so the risk turns on the customer's technical and operational competence as much as its finances. A banker therefore weighs the customer's track record, capacity and the nature of the underlying contract before issuing it, and caps exposure to a percentage of the contract value. It remains a <a href='/glossary/#non-fund-based'>non-fund-based</a> commitment until the beneficiary invokes it for non-performance, at which point it <a href='/glossary/#devolvement'>devolves</a> into a funded liability the customer must immediately reimburse under the counter-indemnity. Financial guarantee →
Bid bond (earnest-money guarantee)
A short-dated <a href='/glossary/#performance-guarantee'>performance-type</a> <a href='/glossary/#bank-guarantee'>bank guarantee</a> that a bidder furnishes to the entity inviting tenders, promising a sum if the bidder wins the contract but then refuses to sign it or to provide the required performance security. It substitutes for the cash earnest-money deposit a tenderer would otherwise lock up, freeing the bidder's working capital while still giving the tendering authority a credible remedy against frivolous or non-serious bids. For the banker it is a low-tenor, well-defined <a href='/glossary/#non-fund-based'>non-fund-based</a> exposure - usually a small percentage of the bid value with a clear expiry tied to the tender validity - but it carries the same discipline as any guarantee: margin, counter-indemnity, and a watch on whether the customer's wider bidding pipeline could trigger multiple simultaneous claims. On invocation it <a href='/glossary/#devolvement'>devolves</a> into a funded liability the customer must reimburse. Bank guarantee →
Home loan (housing loan)
A long-tenure, fully secured retail term loan a bank advances to an individual to buy, build or renovate residential property, repaid in <a href='/glossary/#emi'>EMIs</a> over many years. The loan amount is capped by the regulator-prescribed <a href='/glossary/#ltv'>loan-to-value (LTV)</a> ceiling, with the borrower funding the balance as own contribution (margin), and the property is taken as security - most often through an <a href='/glossary/#equitable-mortgage'>equitable mortgage</a> with the charge registered on <a href='/glossary/#cersai'>CERSAI</a>. Up to a prescribed ticket size a home loan also qualifies as a <a href='/glossary/#psl'>priority-sector</a> (housing) exposure. A banker sizes the loan on repayment capacity (the EMI as a share of income) as much as on property value, prices a floating-rate loan against the bank's <a href='/glossary/#eblr'>EBLR</a>, and monitors servicing under the <a href='/glossary/#irac'>IRAC</a> norms so a defaulting account is classified as <a href='/glossary/#gnpa'>NPA</a> beyond the prescribed period. The exact LTV bands, risk weights and priority-sector ceiling are set by the RBI - confirm current figures on the official source. Home-loan rules →
Fixed-Obligations-to-Income Ratio (FOIR)
The share of a borrower's net monthly income already committed to fixed obligations - existing loan <a href='/glossary/#emi'>EMIs</a>, rent and other recurring commitments plus the proposed new instalment - used by a banker to judge whether a fresh loan is affordable. A lower FOIR signals more headroom to service the new debt, so lenders apply a ceiling (the exact band is a lender's internal credit-policy call) above which they trim the loan amount or lengthen the tenure to bring the instalment within capacity. FOIR is a repayment-capacity test that complements asset-based tests such as <a href='/glossary/#ltv'>LTV</a> on a <a href='/glossary/#home-loan'>home loan</a>: LTV limits how much the security supports, while FOIR limits how much the borrower's income can sustain, and a prudent sanction respects both. Loan-to-Value ratio →
Tangible Net Worth (TNW)
The owners' real stake in a borrowing business - paid-up capital plus free reserves, less intangible assets such as goodwill, preliminary expenses and accumulated losses - that a banker treats as the genuine cushion standing behind a loan. TNW strips out 'paper' assets that cannot be realised in a default, so it is a more conservative measure than book net worth. A healthy TNW signals that the promoters have meaningful skin in the game (see <a href='/glossary/#promoter-contribution'>promoter's contribution / margin money</a>), which is why lenders test it both at sanction and through the life of a <a href='/glossary/#term-loan'>term loan</a>. It is the denominator in the <a href='/glossary/#tol-tnw'>TOL/TNW</a> leverage test and underpins the security comfort a banker takes alongside <a href='/glossary/#collateral'>collateral</a>. TOL/TNW ratio →
Total Outside Liabilities to Tangible Net Worth (TOL/TNW)
A leverage ratio that compares everything a business owes to outsiders - all borrowings, creditors and other liabilities - against its <a href='/glossary/#tangible-net-worth'>tangible net worth</a>, telling a banker how much of the enterprise is funded by other people's money versus the owners' own. A lower TOL/TNW means a more conservatively financed, more resilient borrower; a high ratio flags thin owner cushion and elevated credit risk. It is one of the core financial-appraisal tests in a credit assessment, used alongside the <a href='/glossary/#dscr'>DSCR</a> (which measures repayment capacity) and working-capital tests such as the <a href='/glossary/#mpbf'>MPBF</a> method. Acceptable bands are a lender's internal credit-policy call rather than a fixed regulatory number, and are usually tighter for new or capital-light borrowers. Debt Service Coverage Ratio →
Current ratio
A liquidity test that divides a business's current assets (stock, receivables, cash and other assets convertible within a year) by its current liabilities (dues payable within a year), showing whether short-term resources can cover short-term obligations. A banker reads it as a quick gauge of working-capital health: a ratio comfortably above 1 indicates the borrower can meet near-term dues without strain, while a ratio near or below 1 signals a liquidity squeeze. It is central to working-capital appraisal because it connects directly to the <a href='/glossary/#net-working-capital'>net working capital</a> a firm carries and to the <a href='/glossary/#working-capital-gap'>working-capital gap</a> a bank is asked to fund - the larger the borrower's own long-term contribution to current assets, the stronger the current ratio. The benchmark a lender expects is an internal credit-policy norm, not a fixed regulatory figure. Working-capital gap →
Debt-Equity Ratio (DER)
A capital-structure ratio that compares a borrower's long-term borrowings to the owners' funds (equity / <a href='/glossary/#tangible-net-worth'>tangible net worth</a>), showing how heavily a project or business is financed by debt relative to the promoters' own money. A banker uses DER mainly when appraising a <a href='/glossary/#term-loan'>term loan</a> or project finance: a lower ratio means the owners carry more of the risk and the loan has a thicker equity cushion, while a high ratio concentrates risk on the lender. It complements the broader <a href='/glossary/#tol-tnw'>TOL/TNW</a> test (which captures all outside liabilities, not just term debt) and sits alongside repayment-capacity measures such as the <a href='/glossary/#dscr'>DSCR</a>. The maximum DER a lender will accept is an internal credit-policy norm that varies by sector and project type rather than a single regulatory figure. TOL/TNW ratio →
Interest Coverage Ratio (ICR)
A debt-servicing test that measures how many times a borrower's operating earnings (typically EBIT or EBITDA) cover its interest cost in a period, telling a banker whether the business comfortably earns enough to pay the interest on its loans. A higher ICR signals a wide safety margin; a ratio close to 1 means earnings barely meet interest and leaves no buffer for a downturn. ICR focuses on interest alone, so it is read together with the <a href='/glossary/#dscr'>DSCR</a>, which adds principal repayment to give the fuller servicing picture, and with leverage tests such as the <a href='/glossary/#debt-equity-ratio'>debt-equity ratio</a>. It is a core covenant and monitoring metric on a <a href='/glossary/#term-loan'>term loan</a>; the minimum level required is a lender's credit-policy call rather than a fixed regulatory number. Debt Service Coverage Ratio →
Quick ratio (acid-test ratio)
A stricter liquidity test than the <a href='/glossary/#current-ratio'>current ratio</a>: it divides only the most readily realisable current assets - cash, bank balances and receivables, excluding inventory - by current liabilities, showing whether a business can meet near-term dues without having to sell stock. A banker reaches for it when a borrower carries heavy or slow-moving inventory, because the current ratio can look healthy while actual liquidity is tied up in unsold goods. Read alongside the current ratio and the <a href='/glossary/#net-working-capital'>net working capital</a> position, it sharpens the picture of short-term solvency in working-capital appraisal. The benchmark a lender expects is an internal credit-policy norm, not a fixed regulatory figure. Current ratio →
Substandard asset
The first stage of a <a href='/glossary/#gnpa'>non-performing asset</a> under the RBI's income-recognition and asset-classification (<a href='/glossary/#irac'>IRAC</a>) norms: an account that has remained an NPA for up to a defined initial period after slipping from the <a href='/glossary/#sma'>special-mention</a> stage. A banker reads it as a credit that has weakened and now carries a well-defined risk, attracting provisioning and closer monitoring, but where recovery prospects are still reasonable. It is the rung above a <a href='/glossary/#doubtful-asset'>doubtful asset</a> and signals the start of the NPA ageing ladder that runs through to a <a href='/glossary/#loss-asset'>loss asset</a>. The exact ageing period and provisioning rate are set by RBI and should be confirmed on the official source. Doubtful asset →
Doubtful asset
The middle stage of NPA classification under the RBI <a href='/glossary/#irac'>IRAC</a> norms: an account that has stayed a <a href='/glossary/#substandard-asset'>substandard</a> asset beyond a defined period, so that the weaknesses make full collection highly questionable. A banker treats it as an exposure where loss is probable to the extent the dues are not covered by the realisable value of <a href='/glossary/#collateral'>security</a>, with provisioning that rises the longer the account stays doubtful. It sits between a substandard asset and an outright <a href='/glossary/#loss-asset'>loss asset</a> on the ageing ladder. The precise sub-periods and provisioning percentages are RBI-set and should be confirmed on the official source. Loss asset →
Loss asset
The most severe stage of NPA classification under the RBI <a href='/glossary/#irac'>IRAC</a> norms: an account identified as a loss by the bank, its auditors or RBI inspection, where the amount is considered uncollectible and of such little value that continuing to carry it as a bankable asset is not warranted, even if some salvage value remains. A banker is expected to provide fully for such an exposure (or <a href='/glossary/#write-off'>write it off</a>), while still pursuing recovery through available legal and resolution channels. It is the final rung below a <a href='/glossary/#doubtful-asset'>doubtful asset</a> on the NPA ageing ladder. The exact provisioning treatment is RBI-set and should be confirmed on the official source. Write-off →
Technical (prudential) write-off
A <a href='/glossary/#write-off'>write-off</a> made only at the head-office / books level for prudential and balance-sheet purposes, while the loan continues to stay live in the borrower's individual account and recovery efforts go on in full. Unlike a plain waiver, a technical write-off does not release the borrower or extinguish the bank's legal claim; it removes a fully provided exposure (often a <a href='/glossary/#loss-asset'>loss asset</a>) from the gross book so the reported <a href='/glossary/#gnpa'>GNPA</a> reflects assets still considered realisable. A banker reads it as an accounting cleanup backed by full provisioning, not a surrender of the debt, and any later recovery flows back as income. The exact prudential conditions are RBI-set and should be confirmed on the official source. Write-off →
Upgradation of an NPA account
The reclassification of a <a href='/glossary/#gnpa'>non-performing</a> account back to standard (performing) status once the borrower clears the entire overdue interest and principal and the account behaves satisfactorily, under the RBI <a href='/glossary/#irac'>IRAC</a> norms. For a <a href='/glossary/#restructuring'>restructured</a> account, upgrade follows only after a defined satisfactory-performance period rather than on a single payment. A banker treats upgradation as the reverse of <a href='/glossary/#slippage'>slippage</a>: it lifts an account off the NPA ageing ladder (<a href='/glossary/#substandard-asset'>substandard</a> / <a href='/glossary/#doubtful-asset'>doubtful</a> / <a href='/glossary/#loss-asset'>loss</a>) and lets provisioning be reversed. The precise conditions and observation periods are RBI-set and should be confirmed on the official source. Slippage →
Demand deposit
A bank deposit that the customer can withdraw on demand, in full and without notice - the money in current and savings accounts. It is the 'D' side of the deposit base that, together with a portion of low-cost savings balances, forms a bank's <a href='/glossary/#casa'>CASA</a> franchise. Because demand deposits are repayable at any moment, they are the cheapest but least stable source of funds: they pay little or no interest, yet a banker must hold liquidity against the risk that many depositors call on them at once, which is why they attract the full reserve discipline of <a href='/glossary/#crr'>CRR</a> and feed into the <a href='/glossary/#lcr'>LCR</a> outflow assumptions. Their counterpart is the <a href='/glossary/#term-deposit'>time (term) deposit</a>, which is locked in for a fixed tenor. A high share of demand deposits lowers a bank's cost of funds and supports its net interest margin, so growing stable current and savings balances is a core deposit-mobilisation goal. CASA →
Time deposit (term deposit)
A bank deposit placed for a fixed period at an agreed rate of interest, repayable on maturity rather than on demand - the umbrella term covering a <a href='/glossary/#fixed-deposit'>fixed deposit</a> (a single lump sum) and a <a href='/glossary/#recurring-deposit'>recurring deposit</a> (equal monthly instalments), and including resident and <a href='/glossary/#nre-nro-fcnr'>NRE/NRO/FCNR</a> term accounts. It is the stable, interest-bearing complement to the <a href='/glossary/#demand-deposit'>demand deposit</a>: because the money is contractually committed for a defined tenor, it is a more dependable funding source, which is why a larger time-deposit base improves a bank's structural liquidity and its <a href='/glossary/#nsfr'>NSFR</a>. The trade-off is cost - term deposits carry higher interest than CASA, raising the bank's cost of funds. For the banker, time deposits are part of the deposit liabilities against which <a href='/glossary/#slr'>SLR</a> and <a href='/glossary/#crr'>CRR</a> are computed, and they may be encumbered as a <a href='/glossary/#lien-marked-deposit'>lien-marked deposit</a> to secure credit. Demand deposit →
Auto-sweep / Multi-Option Deposit (MOD)
A linked-account facility under which balances in a savings or current account above a chosen threshold are automatically swept into a <a href='/glossary/#term-deposit'>time deposit</a> to earn the higher term rate, and broken back (reverse-swept) into the operating account whenever a withdrawal or cheque needs more funds than the balance holds. Marketed under names such as Multi-Option Deposit (MOD), auto-sweep or flexi-deposit, it lets a customer keep the liquidity of a <a href='/glossary/#demand-deposit'>demand deposit</a> while earning close to <a href='/glossary/#fixed-deposit'>fixed-deposit</a> returns, with the reverse sweep typically applied in last-in-first-out order so only the minimum needed is broken. For the banker it nudges idle CASA balances into committed deposits without losing the customer's transaction relationship, but the swept portion is a term liability for SLR/CRR and liquidity purposes, and premature break of the swept slice follows the usual term-deposit premature-withdrawal terms. Time deposit →
Interest Rate Risk in the Banking Book (IRRBB)
The risk that movements in market interest rates erode a bank's earnings or the economic value of its banking-book assets and liabilities, because deposits, loans and investments reprice at different times and on different bases. A bank that funds long-dated fixed-rate loans with short-term deposits, for example, sees its margin squeezed when rates rise. Supervisors expect banks to measure IRRBB through both an earnings lens (impact on net interest income) and an economic-value lens (impact on the present value of future cash flows), and to manage it via the asset-liability process rather than let it sit unmonitored. It is distinct from the trading-book interest-rate risk that feeds market-risk capital. Asset-Liability Management (ALM) →
Duration gap analysis
A technique banks use to gauge how sensitive their net worth is to a change in interest rates by comparing the duration (the weighted-average time to repricing or cash flow) of their assets against that of their liabilities. A positive duration gap means assets reprice more slowly than liabilities, so a rate rise hurts economic value; a negative gap means the opposite. It refines the simpler maturity-bucket gap by weighting each item by its price sensitivity, and is a core tool in the asset-liability committee's toolkit for steering interest-rate risk in the banking book. Interest Rate Risk in the Banking Book (IRRBB) →
Value at Risk (VaR)
A statistical estimate of the maximum loss a bank's trading or investment portfolio is likely to suffer over a defined holding period at a chosen confidence level, under normal market conditions. Treasury and risk desks use it to put a single rupee figure on market risk across interest-rate, currency and equity positions, to set and monitor risk limits, and as an input into capital and stress-testing frameworks. Because it describes a threshold rather than the worst case, it is read alongside stress tests and tail-risk measures that probe the losses beyond the VaR cut-off. Investment classification (HTM/AFS/HFT) →
Adjusted Net Bank Credit (ANBC)
The base figure on which a bank's <a href='/glossary/#psl'>priority-sector lending</a> obligation is computed - broadly the bank's outstanding bank credit adjusted in the manner RBI prescribes (for example for certain bonds/investments and a few exclusions), taken as the higher of ANBC or the <a href='/glossary/#non-fund-based'>credit-equivalent of off-balance-sheet exposures</a>. Because the priority-sector target and its sub-targets are expressed as a percentage of ANBC, the denominator matters as much as the lending itself: a banker measures PSL achievement, and any shortfall that must be parked in RIDF-type deposits or bought through a <a href='/glossary/#pslc'>PSLC</a>, against this base. The exact items added back or netted out, and the applicable target percentages, are defined in the RBI Priority Sector Lending Master Direction - confirm the current computation on the official RBI source. Priority sector lending →
Weaker sections (priority sector)
A defined sub-group within <a href='/glossary/#psl'>priority-sector lending</a> covering the most credit-starved borrowers - such as small and marginal farmers, landless labourers, artisans, beneficiaries of government poverty-alleviation schemes, members of scheduled castes and scheduled tribes, self-help groups and other categories RBI specifies. Banks must direct a prescribed share of their <a href='/glossary/#anbc'>ANBC</a> to weaker sections, a sub-target sitting inside the overall priority-sector goal, so that headline PSL achievement is not met purely through larger or better-off borrowers. For the banker it is a distinct line in PSL monitoring, and shortfalls carry the same consequences as any priority-sector gap. The exact list of eligible categories and the applicable sub-target percentage are set in the RBI Priority Sector Lending Master Direction - confirm on the official RBI source. Priority sector lending →
Green deposit
An interest-bearing deposit a customer places with a bank on the understanding that the proceeds will be earmarked for lending to, or investment in, environmentally sustainable activities - renewable energy, clean transport, energy efficiency, green buildings, sustainable water and waste management and similar eligible categories. Under the RBI Framework for Acceptance of Green Deposits, a bank that offers them must publish a board-approved Financing Framework, allocate the money only to a defined positive list of green projects (with certain exclusions such as fossil-fuel activities), and obtain independent third-party verification plus an annual impact assessment of how the funds were used. It is a regular rupee deposit for the customer - covered by the usual deposit terms and <a href='/glossary/#dicgc'>deposit insurance</a> - but ring-fenced in use, giving the bank a transparent, auditable channel to fund its sustainable-finance book. Confirm the current eligible-category list and disclosure requirements on the official RBI Green Deposits Framework. Deposit insurance →
Correspondent banking
An arrangement in which one bank (the correspondent) provides payment, settlement and other services to another bank (the respondent) - typically in a country or currency where the respondent has no branch of its own. The respondent maintains <a href='/glossary/#nostro-vostro'>nostro/vostro accounts</a> with the correspondent and routes its cross-border payments, trade finance and foreign-currency clearing through it, so a bank can offer customers global reach without a worldwide branch network. Because these channels can be misused to move illicit funds, the relationship carries heavy due-diligence obligations - the correspondent must perform <a href='/glossary/#kyc-aml'>KYC</a> on the respondent, understand the nature of its business and apply enhanced scrutiny to higher-risk and 'nested' relationships. For the banker it is both a service line and a compliance responsibility governed by anti-money-laundering norms; confirm the current KYC/AML requirements on the official RBI Master Direction. Nostro and Vostro accounts →