Basic Economics series part 8 (Banking Terminology Part 3)

Already two articles have been dedicated to basic economics and banking terms. If you haven’t read those articles, you are advised to do that (Banking terms part 1,part 2)

Know your customer(KYC): It is a procedure done by a bank to verify the customer identity. They are used to prevent money laundering, Financial fraud and identity theft. All Banks in India will ask two identity proofs(one identity proof for verifying address and one for identity proof for verifying person identity) from prospective  customers. Bank will usually ask electricity bill from customers for verifying his address. Any valid ID can be given by customer to verify his identity.

Recent Guidelines of RBI in KYC process:If a prospective customer has no valid proof to open a  bank account,he can still open a small account by self attesting his own photograph in  the presence of bank official. As the name implies small account is limited in following ways.(source:RBI website)

  • balance in such accounts at any point of time should not exceed Rs.50,000
  • total credits in one year should not exceed Rs.1,00,000
  • total withdrawal and transfers should not exceed Rs.10,000 in a month.
  • Foreign remittances cannot be credited to such accounts.
  • Small accounts will be active for 12 months and thereafter small account holders has provide proof for having applied to any Identity proof to resume the operation of small account.

Kisan Credit Card(KCC): KCC was introduced in 1998 to provide timely credit to the farmers. Credit is given to farmers in order to meet expense incurred during cultivation.

Mutual Funds: It is a professionally managed funds.that is collected from many people. A team of expertise will decide on how to manage those collected funds in order to gain profit from it. Funds will usually be invested in government securities, stocks and bonds. As mutual funds deals with buying and selling of stocks and shares,mutual funds is regulated by SEBI.

Bull market: A financial market or Industry which is predicted to have rise in stock value.

Bear market: A financial market or Industry which is predicted to have fall in stock value.

Money market: It is a short term financial market in which money is traded between two people or groups.

Capital market: It is a long term financial market in which money is traded between individual or group with government.

Core banking solutions(CBS):CBS is a technical term used to represent information and technological advancement that allows banks to share information among themselves quickly. We are debiting money from any ATM due to CBS.

Rupay:Rupay is Indian domestic card and it is introduced by National Payment Corporation Of India(NPCI). VISA,MASTER and MASTERO are foreign cards.

Financial Inclusion:  It is the availability of financial services to all income segments of the society especially the people who are below poverty line. It will prevent money lending by local Goondas at exorbitant rate  to low income people . PMJDY is introduced for financial inclusion.

Labels of ATM

Brown Label ATM: It is owned by  private companies. Cash handling and server maintenance are done by concerned bank. ATM has the logo of concerned bank.

White label ATM: It is owned and operated by private companies.  Any bank customer can deposit or withdraw money from ATM. Private companies need RBI permission before starting White Label ATM. White label ATM has no bank logo as it is not controlled by any bank.  Private companies charge service charge from banks for the operation of white label ATMS.


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