Banking Terms

Banking Book

The banking book comprises assets and liabilities, which are contracted basically on account of relationship or for steady income and statutory obligations and are generally held till maturity.

These securities are accounted for in a different way than those in the trading book, which are traded on the market and valued by the performance of the market.

In other words, an accounting book that includes all securities that are not actively traded by the institution, that are meant to be held until they mature.

Bank Rate

The Bank Rate (BR) has been defined in See 49 of RBI Act 1934 as the 'standard rate at which RBI is prepared to buy or rediscount bills of exchange or other commercial papers eligible for purchase under this act'. The RBI uses its lending power to banks (a) to influence their credit allocation and (b) to develop a genuine bill market in India.

Also, it is called an official interest rate at which the central bank rediscounts the approved bills held by a commercial bank. If the central bank wishes to control credit and inflation, it will increase the bank rate.

CBS

• CBS stands for Core Banking Solutions.
• Core or centralized banking solution is a heart of banking system
• This is a process by which a bank has interconnect their maximum branches through wide area network and only this system provide a facility of any branch or any time banking.

ICOR

ICOR stands for Incremental Capital Output Ratio.

ICOR is the Ratio of investment to growth which equals to one, divided by the marginal product of Capital. The higher the ICOR indicates lower the productivity of capital and lower the ICOR reflects high productivity of Capital. ICOR is the topic or instrument by which the Economic growth rate of company decided.

ICOR is calculated as:

ICOR = ­Annual Investment/Annual Increase in GDP

Global Depository Receipt (GDR)

Global Depository Receipt is a bank certificate issued in more than one country for shares in a foreign company. These shares are held by a foreign branch of an International bank. These shares are trades as domestic shares but are offered for sale globally through the various bank branches. A GDR is a very similar to an American Depository Receipt.

Automatic Stabilizer

Automatic Stabilizer is program that enhances and diminishes automatically for equalizing current economic trends without assistance of government. The best example for automatic stabilizer is unemployment insurance as it automatically replaces the lost income for people who have lost their jobs.

Also, Automatic Stabilizers are features of the tax and transfer systems that tend by their design to offset fluctuations in economic activity without direct intervention by policymakers.

Selective Credit Control

Selective Credit Control (SCC) refers to the directives issued by RBI u/s 21 of Banking Regulation Act 1949 to regulate flow of bank credit against security of sensitive/selected commodities. With a view to prevent speculative holding of essential commodities with the help of bank credit, RBI issues from time to time, directive covering the margin requirements and the level and quantum of accommodation that could be granted against the SCC items.

Selective controls are designed to check the conduct of lenders only, they also influence the attitude of the borrowers, by prescribing the terms on which certain kinds of loans may be made.