CBDC 

CBDC is freely convertible into cash and money from commercial banks.

• Holders of CBDC do not need to have a bank account because it is fungible legal money.
• CBDC is anticipated to reduce the price of issuing currency and the cost of transactions.

Digital Lending

• Traditional lending platforms depended on human intervention and physical interactions at every stage, which increased processing time and the possibility of human error.
• Rapid advancements in cloud computing, artificial intelligence, and blockchain,as well as faster and more affordable internet connectivity, have fuelled the rise of FinTech start-ups, and lending has also transformed and become "digital."
• Digital Lending refers to a remote and automated lending process by use of seamless digital technologies in customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service. DigitalLending involves lending through web platforms or mobile apps, utilizing technology for authentication and credit evaluation.
• Digital lending platforms allow banks to automate their whole loan process,improving client experience.

Card Tokenization:

It refers to replacement of actual card details with an alternate code called the“token”, which shall be unique for a combination of card, token requestor (i.e., the entity which accepts requests from the customer for tokenization of a card and passes it onto the card network to issue a corresponding token) and device (referred as“identified device”). Conversion of the token back to actual card details is known as De-tokenization.

EASE 5.0 Reforms for PSBs

The Ministry of Finance, Govt. of India, through the Indian Banks Association has launched the EASE-.5.0 (Enhanced Access and Service Excellence) reforms agenda for PublicSector Banks. The EASE 5.0 will have Five Themes to be accomplished through 22 action points as outlined hereunder.

Theme-1:Digitally-enabled customer offerings

Theme-2:Big data and analytics

Theme-3:ModernTechnologycapabilities

Theme-4:Collaborative and development-focused banking

Theme-5:Employee Development And governance

Trade Receivables Discounting System (TReDS).

The scheme for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate and other buyers,including Government Departments and Public Sector Undertakings (PSUs), through multiple financiers is known as Trade Receivables Discounting System (TReDS).

The TReDS provides the platform to bring these participants together for facilitatingup- loading, accepting, discounting, trading and settlement of the invoices / bills ofMSMEs.

Positive Pay System for Cheque Truncation

As per RBI directions dated 25.09.20, Positive Pay System shall be implemented fromJanuary 01, 2021 which is applicable to all account holders issuing cheques for amounts of Rs.50,000 and above.

The concept of Positive Pay involves a process of reconfirming key details of large value cheques. Under this process, the issuer of the cheque submits electronically, through channels like SMS, mobile app, internet banking, ATM, etc., certain minimum details of that cheque (like date, name of the beneficiary / payee,amount, etc.)

To the drawee bank, details of which are cross checked with the presented cheque by CTS. Only those cheques which are compliant with above instructions will be acceptedun-der dispute resolution mechanism at the CTS grids.

Regulatory Sandbox

A Regulatory Sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may permit certain regulatory relaxations for the limited purpose of the testing.

Counter Cyclical Capital Buffer

1. Build up a buffer capital in good times.
2. Restricting the banking sector from indiscriminate lending in the period of excess credit growth.
3. It can be maintained in the form of Common Equity Tier I or other fully loss absorbing capital.

Factoring

The Factoring Act, 2011 defines the ‘Factoring Business’ as “the business of acquisition of receivables of assignor by accepting assignment of such receivables financing, whether by way of making loans or advances or in any other manner against the security interest over any receivables”.

Forfaiting

Forfaiting is a method of trade finance that allows exporters to obtain cash by selling their medium and long-term foreign accounts receivable at a discount to a forfaiter, a specialized finance firm or a department in a bank.

Data Warehousing and Mining

• It is the computerized process of storing information from various databases into a single location – cleaned and processed into the right formats for analysis.

• The steps involved in the process of transfer of raw data into a data warehouse are– Extraction, Consolidation, Cleansing, Filtering, Aggregation, Conversion.

• Data mining sorts the data collected and provides valuable and interesting patterns with relative connectivity among them on a summarized form

• This collective and classified information serves as a decision support tool for product pricing and product innovations.

Corporate Governance

• Corporate governance ensures that businesses have appropriate decision-making processes and controls in place so that the interests of all stakeholders (shareholders, employees, suppliers,customers and the community) are balanced.

Hedging

Hedging is the process of protection against losses resulting from unforeseen price changes.

 Systemically Important Banks

The failure of certain banks can cause disruption to banking service. These are calledSystemically Important Banks – SIBs or ‘Too big to fail’ banks.

The Reserve Bank of India (RBI) has identified State Bank of India (SBI), ICICI Bank,and HDFC Bank as domestic systemically important banks (D-SIBs)

Impossible Trinity

The “Impossible Trinity '' refers to the balancing act of (1) inflation (price stability), (2) floating exchange rates (currency appreciation) and (3) capital inflows(capital mobility). Economic theory says, a country can only attain two of the three objectives and it is impossible to balance or control all the three parameters simultaneously, hence it is called an impossible trinity.

Helicopter Money

Helicopter money, also known as a helicopter drop, refers to an unconventional monetary policy tool of printing large sums of money (expanding money supply) and distributing it to the public to spur economic growth during a recession.

A cashless economy

A system where no physical cash is in circulation is a cashless system. Payments are made through credit and debit cards, bank electronic fund transfers or virtual wallets.

Benefits of Cashless Economy:

Cost reduction: cashless system brings down the cost associated with printing,storing and transporting of cash.

Risk reduction: the risk of money getting stolen or lost is minimal.

Convenient: it is also a safer and easier spending option while traveling and available for 24x7 and saves time and cost.

Masala Bonds

Rupee denominated borrowings issued by Indian entities in the overseas market. It is aFinancial instrument through which Indian entities can raise money from overseasMarket in Indian Rupees.

Gross Vs Net NPA

GROSS NPAs: It is the Principal dues of NPAs plus Funded Interest Term Loan where the corresponding contra credit is parked in sundries Account in respect of NPA Accounts

Net NPA –(minus): 

1. Provisions held in the case of NPA Accounts as per asset classification(including additional Provisions for NPAs at higher than prescribed rates).
2. DICGC / ECGC claims received and held pending adjustment.
3. Part payment received and kept in Suspense A/c or any other similar a/c.
4. Balance in Sundries Account (Interest Capitalization – RestructuredAccounts)

Fin-Tech

The term “FinTech” is a contraction of the words “finance” and “technology”. Itrefers to the technological start-ups that are emerging to challenge traditional banking and financial players and covers an array of services, from crowdfunding funding platforms and mobile payment solutions to online portfolio management tools and international money transfers.

Peer-to-Peer (P2P) lender

Peer-to-peer (P2P) lenders connect lenders and borrowers, using advanced technologies to speed up loan acceptance. These technologies are designed to increase efficiency and reduce the time involved in access to credit.

Crowdfunding

Crowdfunding is a way of raising debt or equity from multiple investors via an internet- based platform

Pari Passu Charge

A ‘Pari Passu’ charge gives lenders a right to the property on which a charge is created in proportion to the amount lent to the debtor.

Balloon payment: 

The ‘balloon payment’ is the final lump sum payment that is due. When the entire loan payment is not amortized over the life of the loan, the remaining balance is due as the final repayment to the lender. Balloon payment can occur within an adjustable rate or fixed rate mortgage.

Cash Reserve Ratio (CRR) (4.50)

Every scheduled bank, small finance bank and payments bank shall maintain minimum CRR of not less than ninety per cent of the required CRR on all days during the reporting fortnight, in such a manner that the average of CRR maintained daily shall not be less than the CRR prescribed by the Reserve Bank.

Statutory Liquidity Ratio (SLR) (18%)

Every bank, in addition to the cash reserves which it is required to maintain under these Directions, shall maintain in India, assets, the value of which shall not be less than such percentage not exceeding forty per cent of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight as theReserve Bank may, by notification in the Official Gazette, specify from time to time and such assets shall be maintained in such form and such manner, as may be specified in such notification.

Adjusted Net Bank Credit (ANBC): 

ANBC denotes the outstanding Bank Credit inIndia minus bills rediscounted with RBI and other approved Financial Institutions plusper-mitted non SLR bonds/debentures under Held to Maturity (HTM) category plus other in-vestments eligible to be treated as part of priority sector lending (e.g.investments in securitised assets). The outstanding deposits under RIDF and other funds with NABARD, NHB, SIDBI and MUDRA Ltd. in lieu of non-achievement of priority sector lending targets/sub-targets will form part of ANBC. Advances Extended in India against the incremental FCNR (B)/NRE deposits, qualifying for exemption from CRR/SLR requirements as per RBI guidelines.

(ANBC = Net Bank Credit + Investment made in non-SLR Bonds held in HRM category)

INSIDE LIABILITIES: 

Inside liabilities are capital, reserves and risk provisions.

Regulatory Capital: 

Regulatory capital means total of tier I and tier II capital calculated as per extant instructions on capital adequacy.

Green Finance: 

Green Finance refers to initiatives to provide financial support for green growth i.e., cleaner production. Cleaner production is emerging as an important medium to attain sustainable development. It enables the manufacturer or service provider to adopt green, energy efficient technologies which helps in lesser waste, positive impact on environment and thus, leading to greater sustainability.

Haircut: 

The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction.

Subordination: 

Subordination in banking and finance refers to the order of priorities in claims for ownership or interest in various assets. Subordination is the process by which a creditor is placed in a lower priority for the collection of its debt from its debtor's assets than the priority the creditor previously had. In common parlance, the debt is said to be subordinated but in reality, it is the right of the creditor to collect the debt that has been reduced in priority.

Narrow Banking: 

Narrow Bank is the system of banking under which a bank placesits fund in risk free assets with maturity period matching its liability maturity profile,so that there is no problem relating to asset liability mismatch and the quality of assets remains intact without leading to emergence of NPAs.

Systemic Risk: 

The RISK of damage being done to the health of the FINANCIAL SYSTEM as a whole. A constant concern of BANK regulators is that the collapse of a single bank could bring down the entire financial system. This is why regulators often organize a rescue when a bank gets into financial difficulties.