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  • Crazyboy's Banking Lectures: Banking Jargon a day

    Anil Jain

    Anil Jain

    @CrazyBoy
    Updated: Oct 26, 2024
    Views: 1.1K
    There are various banking jargon we use in banking arena; do we all know the meaning of them.

    When I started to gain the knoweldge of banking there were 'n' number of terms which were alien to me.

    Now, I thought why not start a thread with explanations of Banking jargons. In this thread, I will try to post the explanation of a banking terminology on daily basis (atleast will try to post on each working day), Thread is named as

    Banking Jargon a day...

    -CB
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  • Anil Jain

    Member • Jan 4, 2010

    Banking:
    According to Banking Regulation Act,” Banking means accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdrawalable by checks, drafts, order or otherwise”.

    Just mentioning, Banks are not a charitable organization they are profit making organization. If you think that banks give you interest on your saving (for free), then bank is making a lots of money with that amount. I will be explaining how banks works in a separate thread.

    A famous saying for banks are:
    Banks are 10% storage and 90% accounting.

    -CB
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  • Manish Goyal

    Member • Jan 4, 2010

    crazyboy
    Banking:
    If you think that banks give you interest on your saving (for free), then bank is making a lots of money with that amount.
    -CB
    Can you Please explain this more?I think you mean by providing loans ! right?
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  • Anil Jain

    Member • Jan 4, 2010

    goyal420
    Can you Please explain this more?I think you mean by providing loans ! right?
    Take an example, In India Banks generally give ~3.5 % interest per quarter on savings account.

    From where do you think bank gives you this 3.5% ?
    They give your money to others on loan on much higher interest rate +8%, thats how they make moeny (difference in interest rates). Now, you will question what if you want to withdraw your money, bank will give you your money from its own amount.

    their is a concept of liquidity ratio for each bank. Based on some surveys each bank has to retain some amount with it, so that if somebody will withdraw their own amount bank shouldn't need to say , No.

    This is a very big topic how banks make moey, and complete cycle of money. I would try to take that in the Banking lectures as well.

    Hope I have cleared the doubt at the elementry level.

    -CB
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  • Manish Goyal

    Member • Jan 4, 2010

    Thanks ..CB for reply..
    Looking forward for more such information
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  • silverscorpion

    Member • Jan 5, 2010

    I'm lately getting more and more curious about economics and its intricacies like banking. I'd love to know more about them and I have many questions nagging my mind for a very long time. I hope I get answers to all of them.

    For now, I wait for the next lecture on banking. Good job!! Keep it up!! 😀😀
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  • Anil Jain

    Member • Jan 5, 2010

    Direct Deposit

    Direct deposit is a banking term used to refer to certain systems used to transfer money:

    In Europe, system is called as the giro system
    In the United States, it is Automated Clearing House (ACH)
    In Australia, Direct Debit and Direct Deposit are performed through the Direct Entry network

    -CB
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  • Anil Jain

    Member • Jan 6, 2010

    ACH

    Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kind of bills. Debit transfers also include new applications such as the Point-of-Purchase (POP) check conversion pilot program sponsored by NACHA - The Electronic Payments Association. Both the government and commercial sectors use ACH payments. Businesses are also increasingly using ACH to collect from customers online, rather than accepting credit or debit cards.

    -CB
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  • Anil Jain

    Member • Jan 8, 2010

    CHIPS

    Clearing House Interbank Payments System (CHIPS) is the main privately held clearing house for large-value transactions in the United States. Along with Fedwire Funds Service operated by the Federal Reserve Banks, CHIPS forms the primary U.S. network for large-value domestic and international USD payments. CHIPS transfers are governed by Article 4A of Uniform Commercial Code. CHIPS is owned by financial institutions. CHIPS participants may be commercial banks or investment companies. Until 1998, to be a CHIPS participant, a financial institution was required to maintain a branch or an agency in New York City. A non-participant wishing to make international payments using CHIPS was required to employ one of the CHIPS participants to act as its correspondent or agent. Banks typically prefer to make payments of higher value and of a less time-sensitive nature by CHIPS instead of Fedwire, as CHIPS is less expensive.

    CHIPS differs from the Fedwire payment system in three key ways. First, it is privately owned, whereas the Fed is part of a regulatory body.

    -CB
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  • Anil Jain

    Member • Jan 11, 2010

    Accounts Receivable Conversion

    Accounts Receivable Conversion is a process that allows paper checks received in payment for an account receivable to be electronically scanned and converted into an electronic payment through the Automated Clearing House. ARC saves time and the expense of actually processing the check. Both the vendor and the bank on which the payment was drawn receive only an electronic image of the check.

    As the financial industry becomes increasingly computerized, ARC has become the norm rather than the exception for large payment processors. Prior to ARC and electronic payments, the most common method of payment was lockbox banking, in which payments are made to a post office box serviced by a bank. ARC speeds the payment to the vendor, who otherwise would have to wait for a physical check to be transported and processed.

    -CB
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