banking interview questions and answers

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

Identification: When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.

Index Fund:  A mutual fund that holds shares in proportion to their representation in a market index, such as the S&P 500.

Initial Public Offering (IPO): An event where a company sells its shares to the public for the first time. The company can be referred to as an IPO for a period of time after the event.

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

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

Bouncing of a cheque: Where the name of the endorsee or transferee is not mentioned on the instrument.

Fixed Rate Bonds:  Bonds bearing fixed interest payments until maturity date.

Floating Rate Bonds: Bonds bearing interest payments that are tied to current interest rates.

Garnishee Order: When a Court directs a bank to attach the funds to the credit of customer's account under provisions of Section 60 of the Code of Civil Procedure, 1908.

General Lien: A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt

Factoring: Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.

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banking notes

Cheque: Cheque is a bill of exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.

Bull Markets: Favorable markets associated with rising prices and investor optimism.

Capital Gain: The amount by which the proceeds from the sale of a capital asset exceed its original purchase price.

Capital Markets: The market in which long-term securities such as stocks and bonds are bought and sold.

Certificate of Deposits (CDs): Savings instrument in which funds must remain on deposit for a specified period and premature withdrawals incur interest penalties.

Earnings per Share (EPS): The amount of annual earnings available to common stockholders as stated on a per share basis.

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

E-Banking : E-Banking or electronic banking is a form of banking where funds are transferred through exchange of electronic signals between banks and financial institution and customers ATMs, Credit Cards, Debit Cards, International Cards, Internet Banking and new fund transfer devices like SWIFT, RTGS belong to this category.

EFT - (Electronic Fund Transfer): EFT is a device to facilitate automatic transmission and processing of messages as well as funds from one bank branch to another bank branch and even from one branch of a bank to a branch of another bank. EFT allows transfer of funds electronically with debit and credit to relative accounts.

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

Consumer Protection Act: It is implemented from 1987 to enforce consumer rights through a simple legal procedure. Banks also are covered under the Act. A consumer can file complaint for deficiency of service with Consumer District Forum for amounts upto Rs.20 Lacs in District Court, and for amounts above Rs.20 Lacs to Rs.1 Crore in State Commission and for amounts above Rs.1 Crore in National Commission.

Core Banking Solutions (CBS): Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.

Crossing of Cheques: Crossing refers to drawing two parallel lines across the face of the cheque. A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing. A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.

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banking terminology

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