BFSI KNOWLEDGE · BANKING · FINANCE · SECURITIES · INSURANCE
Banking Terminology & Complete BFSI Glossary
A comprehensive, exam-oriented dictionary covering essential banking vocabulary, RBI regulations, lending, risk, payments, insurance, capital markets, investment products, pensions, rural development finance and specialist financial institutions.
Reviewed 12 November 202622 thematic chapters324 terminology entries25 interactive MCQs14 FAQs
☰ Browse all 22 BFSI terminology chapters
01. Banking Foundations & Institution Types02. Deposits, Accounts & Customer Operations03. Know Your Customer (KYC), AML & Compliance04. Loans, Credit & Working Capital05. Collateral, Guarantees & Recovery06. Credit Information & Asset Quality07. Bank Balance Sheet, Income & Ratios08. Central Banking & Monetary Policy09. Basel, Prudential Regulation & Risk10. Payments, Clearing & Settlement11. Cards, Digital Banking & Cybersecurity12. Treasury, Money Markets & Bonds13. Foreign Exchange & International Trade14. Banking Correspondence & Negotiable Instruments15. Insurance Foundations & Policy Terms16. Life Insurance & Annuities17. General, Health & Motor Insurance18. Capital Markets & Securities Regulation19. Mutual Funds, Investment Products & Derivatives20. Rural, Agriculture, MSME & Development Finance21. Financial Markets, Regulators & Institutions22. Exam-Focused Formulas & High-Yield ContrastsPractice MCQsOfficial references
Showing all 324 glossary entries in 22 chapters.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
01. Banking Foundations & Institution Types
Study the exact meaning and practical application of these 15 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Banking | Accepting public deposits for lending or investment with repayment and withdrawal features prescribed by law. |
| Central bank | Monetary authority managing currency, liquidity, payment-system oversight and other statutory functions. |
| Commercial bank | Licensed bank providing permissible deposit, payment and credit services to households and businesses. |
| Scheduled bank | Bank included in the Second Schedule to the Reserve Bank of India Act, 1934. |
| Public sector bank (PSB) | Commercial bank in which government holds controlling ownership under the applicable framework. |
| Private sector bank | Bank predominantly owned by private shareholders, subject to banking regulation. |
| Foreign bank | Bank incorporated abroad operating in India subject to applicable RBI authorisation. |
| Regional Rural Bank (RRB) | Institution established to advance rural banking under the Regional Rural Banks Act. |
| Small Finance Bank (SFB) | Differentiated bank with financial-inclusion and priority-lending focus under RBI licensing conditions. |
| Payments Bank | Differentiated bank permitted specified deposit and payment services but not lending. |
| Co-operative bank | Banking institution organised in the co-operative sector under applicable banking and co-operative laws. |
| Non-Banking Financial Company (NBFC) | Financial company regulated under an NBFC framework; not automatically permitted demand deposits or cheque issuance. |
| Development Financial Institution (DFI) | Institution supporting targeted long-term or sectoral development finance. |
| Financial intermediation | Channeling savers' funds and other financing resources into loans and investments. |
| Financial inclusion | Affordable and appropriate access to useful financial services for underserved groups. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
02. Deposits, Accounts & Customer Operations
Study the exact meaning and practical application of these 16 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Demand deposit | Deposit ordinarily repayable on demand, subject to account terms. |
| Term deposit | Deposit maintained for a specified tenure under agreed interest and withdrawal conditions. |
| Savings account | Deposit account commonly used for individual savings and transactions. |
| Current account | Transaction-focused account often used by businesses; usually non-interest-bearing. |
| Fixed deposit (FD) | Term deposit with agreed tenure and interest conditions. |
| Recurring deposit (RD) | Deposit product built through agreed periodic contributions. |
| CASA | Current Account and Savings Account deposits, often measured as a share of total deposits. |
| Basic Savings Bank Deposit Account (BSBDA) | Basic banking account with prescribed minimum facilities under RBI directions. |
| Overdraft (OD) | Arrangement permitting eligible withdrawals beyond available balance up to an authorised limit. |
| Standing instruction (SI) | Customer-authorised instruction to execute recurring transactions on specified terms. |
| Direct debit | Authorised collection of payments from a payer's account through a supported mechanism. |
| Nominee | Person designated to receive or facilitate payment of certain balances on death, subject to succession law. |
| Joint account | Account held by multiple persons with specified operating instructions. |
| Inoperative account | Account classified by the bank as inoperative under prevailing regulatory criteria. |
| Lien | Legally available right to retain assets or funds as security for a claim. |
| Bank reconciliation | Matching a cashbook or ledger with bank statements and explaining differences. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
03. Know Your Customer (KYC), AML & Compliance
Study the exact meaning and practical application of these 15 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Know Your Customer (KYC) | Customer identity verification and related compliance framework. |
| Customer Due Diligence (CDD) | Identifying and verifying customers and assessing relevant risks. |
| Enhanced Due Diligence (EDD) | Additional verification or monitoring for higher-risk relationships. |
| Central KYC Records Registry (CKYCR) | Central registry receiving and storing prescribed KYC records. |
| Beneficial owner | Natural person ultimately owning or controlling a customer or transaction under relevant rules. |
| Politically Exposed Person (PEP) | Person entrusted with a prominent public function, as defined by applicable rules. |
| Anti-Money Laundering (AML) | Controls designed to prevent, detect and report money laundering. |
| Countering Financing of Terrorism (CFT) | Controls intended to prevent and detect financing of terrorism. |
| Financial Intelligence Unit–India (FIU-IND) | India's central agency for receiving and analysing prescribed financial intelligence reports. |
| Suspicious Transaction Report (STR) | Prescribed report of a transaction suspected of involving specified unlawful activity. |
| Cash Transaction Report (CTR) | Report of qualifying cash transactions under applicable reporting rules. |
| Customer risk profiling | Classifying customer relationships for proportionate due diligence and monitoring. |
| Sanctions screening | Checking persons, entities and transactions against applicable sanctions or restrictions. |
| PAN | Permanent Account Number issued under India's income-tax framework. |
| FATCA / CRS | International tax-account information compliance and exchange frameworks with distinct legal bases. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
04. Loans, Credit & Working Capital
Study the exact meaning and practical application of these 22 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Principal | Original amount lent or invested before interest and repayment adjustments. |
| Secured loan | Loan supported by an enforceable security interest in qualifying collateral. |
| Unsecured loan | Loan not backed by a specific pledged or mortgaged asset. |
| Term loan | Facility normally repaid over a specified schedule or tenor. |
| Working capital | Funds needed for day-to-day operating assets and liabilities. |
| Cash credit (CC) | Bank working-capital facility allowing drawings within a sanctioned limit and conditions. |
| Overdraft facility | Credit allowing an account to be drawn below zero within agreed limits. |
| Drawing power (DP) | Amount a borrower may draw based on eligible security and facility conditions. |
| Sanctioned limit | Maximum credit amount authorised by a lender subject to agreed conditions. |
| Disbursement | Actual release of approved loan funds. |
| Moratorium | Contractual or regulatory period granting defined repayment relief; interest may continue. |
| Equated Monthly Instalment (EMI) | Periodic payment ordinarily comprising principal and interest under a loan schedule. |
| Amortisation | Progressive reduction of a loan balance through scheduled repayments. |
| Prepayment | Repayment of all or part of a loan before scheduled maturity. |
| Floating interest rate | Interest rate that may reset according to a benchmark and contractual terms. |
| Fixed interest rate | Rate contractually fixed for a defined period or loan term. |
| External Benchmark Lending Rate (EBLR) | Rate linked to a permitted external benchmark under applicable RBI rules. |
| Marginal Cost of Funds-based Lending Rate (MCLR) | Bank lending-rate benchmark based on prescribed marginal-cost methodology. |
| Annual Percentage Rate (APR) | Annualised measure of borrowing cost including specified charges under applicable disclosure rules. |
| Debt Service Coverage Ratio (DSCR) | Cash available for debt servicing relative to scheduled debt-service obligations. |
| Loan-to-Value (LTV) | Loan amount relative to value of eligible collateral, expressed as a percentage. |
| Credit risk | Risk that an obligor fails to meet contractual financial obligations. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
05. Collateral, Guarantees & Recovery
Study the exact meaning and practical application of these 16 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Collateral | Asset or right securing repayment or performance of an obligation. |
| Mortgage | Transfer or creation of an interest in immovable property to secure a debt under applicable law. |
| Pledge | Security involving delivery of possession of goods or other eligible assets. |
| Hypothecation | Charge on movable assets without ordinarily transferring possession to the lender. |
| Charge | Security interest over property created to support an obligation. |
| Personal guarantee | Undertaking by an individual to meet defined obligations if the principal obligor defaults. |
| Bank guarantee (BG) | Bank's undertaking to pay a beneficiary if specified guarantee conditions are met. |
| Letter of Credit (LC) | Bank undertaking to honour a compliant presentation of specified documents under agreed terms. |
| Non-fund-based facility | Credit-related bank undertaking such as an LC or guarantee without immediate standard disbursement. |
| Securitisation | Pooling or transferring financial assets to issue securities or otherwise finance exposures. |
| Debt Recovery Tribunal (DRT) | Tribunal handling specified bank and financial-institution debt recovery matters. |
| SARFAESI Act | Indian law providing eligible secured creditors mechanisms to enforce security interests, subject to conditions. |
| Insolvency and Bankruptcy Code (IBC) | Framework for specified insolvency resolution and liquidation proceedings. |
| One-Time Settlement (OTS) | Negotiated compromise of an outstanding debt subject to lender policy and approval. |
| Write-off | Accounting removal or reduction of a loan asset; by itself does not necessarily waive the debt. |
| Waiver | Legally effective relinquishment of an obligation or claim to the specified extent. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
06. Credit Information & Asset Quality
Study the exact meaning and practical application of these 15 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Credit Information Company (CIC) | Regulated entity collecting and providing qualifying credit information. |
| Credit score | Statistical indicator of assessed credit risk based on available information. |
| CIBIL | Brand associated with TransUnion CIBIL, one Indian credit information company; not all credit bureaus. |
| Days Past Due (DPD) | Number of days a payment remains overdue from the contractual due date. |
| Special Mention Account (SMA) | Account showing early signs of stress under applicable classification rules. |
| Non-Performing Asset (NPA) | Exposure meeting RBI's applicable non-performance criteria. |
| Gross NPA (GNPA) | Aggregate outstanding value of loans classified non-performing before applicable adjustments. |
| Net NPA (NNPA) | Measure of non-performing advances after specified deductions. |
| Provisioning | Recognition or allocation for expected or identified loan losses under relevant rules. |
| Substandard asset | NPA remaining in the specified initial period after NPA classification. |
| Doubtful asset | NPA remaining in the substandard category beyond the specified period. |
| Loss asset | Asset identified as substantially uncollectible under prudential classification rules. |
| Restructuring | Modification of credit terms pursuant to an agreed or regulatory resolution arrangement. |
| Evergreening | Artificially keeping a stressed loan appearing current through improper additional lending or transactions. |
| Wilful default | Regulatory designation based on prescribed criteria and due process; not merely any missed payment. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
07. Bank Balance Sheet, Income & Ratios
Study the exact meaning and practical application of these 16 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Asset | Economic resource or claim controlled by the bank; loans are typically assets. |
| Liability | Obligation owed by the bank; customer deposits are typically liabilities. |
| Equity | Residual interest in assets after liabilities. |
| Net Interest Income (NII) | Interest earned minus interest paid over a reporting period. |
| Net Interest Margin (NIM) | Net interest income divided by a relevant average interest-earning asset base. |
| Credit–Deposit Ratio (CD ratio) | Advances divided by deposits multiplied by 100, subject to reporting definitions. |
| CASA ratio | Current plus savings account deposits divided by total deposits multiplied by 100. |
| Return on Assets (ROA) | Net income divided by average assets, usually expressed as a percentage. |
| Return on Equity (ROE) | Net income relative to average shareholders' equity. |
| Cost-to-Income Ratio | Operating cost divided by relevant operating income under the chosen reporting definition. |
| Capital Adequacy Ratio / CRAR | Eligible regulatory capital divided by risk-weighted assets, under applicable methodology. |
| Risk-Weighted Assets (RWA) | Exposure amounts adjusted for prescribed risk weights and regulatory calculations. |
| Leverage ratio | Capital measure relative to an exposure measure without standard risk-weight adjustments. |
| Contingent liability | Potential obligation depending on future specified events. |
| Asset–Liability Management (ALM) | Management of mismatches in liquidity, tenor and interest-rate exposures. |
| Asset–Liability Committee (ALCO) | Committee overseeing the bank's asset-liability and treasury risk decisions. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
08. Central Banking & Monetary Policy
Study the exact meaning and practical application of these 15 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Repo rate | Rate for the RBI's specified repurchase liquidity operation; policy signal in India. |
| Reverse repo | Opposite leg of a repo transaction; not necessarily the operational floor of today's corridor. |
| Standing Deposit Facility (SDF) | RBI facility for absorbing liquidity without collateral, subject to rules. |
| Marginal Standing Facility (MSF) | RBI overnight borrowing facility for eligible banks subject to conditions. |
| Cash Reserve Ratio (CRR) | Specified cash reserves maintained with RBI by applicable banks. |
| Statutory Liquidity Ratio (SLR) | Required holding of specified liquid assets by applicable banks. |
| Net Demand and Time Liabilities (NDTL) | Specified liability base used in certain banking reserve calculations. |
| Monetary Policy Committee (MPC) | Statutory committee deciding the policy rate required to achieve the inflation target. |
| Open Market Operations (OMO) | Central-bank purchase or sale of securities to manage liquidity. |
| Liquidity Adjustment Facility (LAF) | RBI framework of liquidity operations including repo-related instruments. |
| Monetary transmission | Process by which policy actions influence market rates, credit and the broader economy. |
| Inflation targeting | Monetary-policy framework oriented to the notified inflation objective. |
| Bank Rate | RBI reference rate with statutory and operational applications under prevailing policy arrangements. |
| Liquidity | Capacity to meet payment obligations when due without unacceptable loss. |
| Solvency | Capacity for an institution's assets and capital position to support its liabilities. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
09. Basel, Prudential Regulation & Risk
Study the exact meaning and practical application of these 14 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Basel Committee on Banking Supervision (BCBS) | Global standard-setting forum for bank prudential supervision. |
| Basel III | International package of bank capital, leverage and liquidity reforms. |
| Common Equity Tier 1 (CET1) | Highest-quality regulatory capital category, mainly eligible common equity and retained earnings. |
| Additional Tier 1 (AT1) | Qualifying regulatory capital instruments with specified loss-absorption features. |
| Tier 2 capital | Eligible supplementary regulatory capital under prescribed criteria. |
| Capital Conservation Buffer (CCB) | Additional CET1 buffer above certain minimum capital requirements. |
| Liquidity Coverage Ratio (LCR) | High-quality liquid assets relative to prescribed stressed 30-day net outflows. |
| Net Stable Funding Ratio (NSFR) | Available stable funding relative to required stable funding over a longer horizon. |
| High-Quality Liquid Assets (HQLA) | Assets meeting prescribed liquidity and quality requirements for LCR. |
| Operational risk | Risk arising from failures of processes, people, systems or external events. |
| Market risk | Risk of loss from adverse market-price or rate movements. |
| Interest Rate Risk in Banking Book (IRRBB) | Interest-rate exposure arising from non-trading balance-sheet positions. |
| Concentration risk | Risk from excessive exposure to a borrower, sector or correlated group. |
| Stress testing | Evaluating potential outcomes under severe but plausible adverse scenarios. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
10. Payments, Clearing & Settlement
Study the exact meaning and practical application of these 17 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| National Electronic Funds Transfer (NEFT) | RBI-operated electronic funds transfer system using batch settlement. |
| Real Time Gross Settlement (RTGS) | RBI-operated real-time gross settlement system for eligible large-value transfers. |
| Immediate Payment Service (IMPS) | NPCI-operated instant interbank electronic funds transfer service. |
| Unified Payments Interface (UPI) | NPCI-developed interoperable interface for supported instant payment transactions. |
| National Payments Corporation of India (NPCI) | Organisation operating multiple Indian retail payment infrastructures and products. |
| Indian Financial System Code (IFSC) | Alphanumeric bank branch or participant code used in specified payment systems. |
| Magnetic Ink Character Recognition (MICR) | Technology and code convention associated with cheque processing. |
| Cheque Truncation System (CTS) | Cheque-clearing process using electronic images and associated data. |
| Aadhaar Enabled Payment System (AePS) | Bank-led interoperable transactions using Aadhaar-based authentication under applicable rules. |
| Aadhaar Payment Bridge System (APBS) | NPCI-operated system for routing qualifying Aadhaar-linked benefit payments. |
| Bharat Bill Payment System (BBPS) | Interoperable bill-payment ecosystem under RBI-authorised arrangements. |
| National Automated Clearing House (NACH) | Centralised electronic clearing for eligible bulk debit and credit transactions. |
| Point of Sale (POS) | Merchant payment acceptance location or device. |
| Merchant Discount Rate (MDR) | Merchant-side charge associated with acquiring and processing certain payment transactions. |
| Payment aggregator (PA) | Entity facilitating merchant receipt of payments under applicable regulatory arrangements. |
| Payment gateway (PG) | Technical infrastructure routing electronic payment transactions. |
| Settlement | Final transfer of funds or securities fulfilling a payment or trade obligation. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
11. Cards, Digital Banking & Cybersecurity
Study the exact meaning and practical application of these 14 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Debit card | Payment card ordinarily linked to deposit funds or authorised facilities. |
| Credit card | Card providing credit with billing, repayment and finance-charge conditions. |
| Prepaid Payment Instrument (PPI) | Instrument storing value paid in advance for eligible transactions. |
| ATM | Automated Teller Machine for authorised self-service banking transactions. |
| Card tokenisation | Replacing sensitive card credentials with a limited-use or domain-specific token. |
| Two-Factor Authentication (2FA) | Authentication based on two distinct permitted factors. |
| One-Time Password (OTP) | Time- or transaction-limited authentication code; must not be shared. |
| Card Verification Value (CVV) | Security code associated with certain card-not-present transaction checks. |
| Phishing | Fraudulent messages or websites designed to steal sensitive information. |
| Vishing | Voice-call-based deception to obtain credentials or money. |
| Smishing | Fraudulent SMS messages used for deception or malicious links. |
| SIM-swap fraud | Unauthorised takeover or replacement of a mobile SIM used to intercept access or authentication. |
| Cyber resilience | Ability to prevent, withstand, respond to and recover from cyber incidents. |
| Encryption | Transformation of information to protect its confidentiality against unauthorised access. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
12. Treasury, Money Markets & Bonds
Study the exact meaning and practical application of these 14 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Treasury bill (T-bill) | Short-term Government of India debt security issued at discount and redeemed at face value. |
| Government security (G-sec) | Debt security issued by central or state government, as applicable. |
| Dated security | Government debt instrument with specified maturity and payment terms. |
| Coupon | Stated periodic interest payment on a bond. |
| Yield to Maturity (YTM) | Discount rate equating bond price to expected contractual cash flows under assumptions. |
| Duration | Measure of bond price sensitivity to changes in yield, subject to chosen definition. |
| Basis point (bps) | One-hundredth of a percentage point; 100 bps = 1 percentage point. |
| Repo transaction | Sale of securities subject to agreed future repurchase. |
| Call money | Very short-term unsecured interbank borrowing or lending, ordinarily overnight. |
| Notice money | Short-term interbank funding for a notice period beyond overnight up to the prescribed tenor. |
| Commercial Paper (CP) | Unsecured short-term promissory note issued by eligible entities. |
| Certificate of Deposit (CD) | Negotiable money-market instrument issued by eligible banks and specified institutions. |
| Mark-to-Market (MTM) | Valuing an asset or liability using applicable current market measurements. |
| Hedging | Using transactions to reduce identified financial-market exposures. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
13. Foreign Exchange & International Trade
Study the exact meaning and practical application of these 13 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Foreign Exchange Management Act (FEMA) | Principal Indian framework for foreign-exchange management and transactions. |
| Foreign exchange (FX) | Conversion, valuation or trading of one currency against another. |
| Spot exchange rate | Exchange rate for a transaction settling on the applicable spot convention. |
| Forward contract | Agreement to buy or sell an asset or currency at a future date on specified terms. |
| Currency swap | Agreement to exchange currency cash flows or principal under contracted terms. |
| Nostro account | Our bank's account held with another bank, typically in a foreign currency abroad. |
| Vostro account | Another bank's account maintained on our books. |
| SWIFT | Global financial messaging network; not itself the final settlement system. |
| Authorised Dealer (AD) | Entity authorised by RBI to undertake specified foreign-exchange business. |
| Letter of Credit (LC)—trade | Documentary bank undertaking to pay against complying presentations under agreed rules. |
| Bill of Lading (BL) | Transport document evidencing receipt and relevant carriage terms for goods. |
| Import Letter of Credit | Bank payment undertaking opened to support an eligible import transaction. |
| Export credit | Financing provided to eligible exporters before or after shipment under applicable rules. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
14. Banking Correspondence & Negotiable Instruments
Study the exact meaning and practical application of these 10 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Cheque | Bill of exchange drawn on a specified banker and payable on demand. |
| Drawer | Person who draws or issues a cheque or bill. |
| Drawee | Person or bank directed to pay the cheque or bill. |
| Payee | Person in whose favour a payment instrument is issued. |
| Endorsement | Signature or instruction on an instrument for negotiation or other specified purpose. |
| Crossed cheque | Cheque bearing prescribed crossing that generally affects collection and payment manner. |
| Demand Draft (DD) | Bank-issued instrument directing payment of a specified amount subject to terms. |
| Promissory note | Written unconditional promise to pay a sum of money as legally defined. |
| Bill of exchange | Written unconditional order to pay a specified sum under legal requirements. |
| Cheque dishonour | Bank's return of a presented cheque unpaid for a stated reason. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
15. Insurance Foundations & Policy Terms
Study the exact meaning and practical application of these 18 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Insurance | Risk-transfer arrangement under which an insurer provides contracted cover in return for consideration. |
| Insurer | Company authorised to conduct specified insurance business. |
| Policyholder | Person or entity that holds an insurance policy. |
| Insured | Person or interest protected by insurance coverage. |
| Premium | Payment due for insurance protection under policy terms. |
| Sum insured | Maximum specified cover or payment basis for insured events, subject to policy wording. |
| Sum assured | Contractual benefit amount, frequently used in life insurance, subject to policy terms. |
| Deductible | Amount of an eligible loss borne by insured before insurer payment. |
| Co-payment | Agreed percentage or share of admissible claim cost paid by insured. |
| Exclusion | Event, condition or circumstance outside the agreed cover. |
| Waiting period | Period during which specified coverage is restricted under policy conditions. |
| Grace period | Extra period allowed for paying premiums subject to applicable rules and policy conditions. |
| Claim | Formal request for benefit under an insurance contract. |
| Underwriting | Assessment and pricing of insurance risk and insurability. |
| Reinsurance | Insurance purchased by an insurer to transfer part of its insured risk. |
| Rider | Supplementary insurance benefit or term attached to a base policy. |
| No Claim Bonus (NCB) | Benefit for claim-free periods under eligible policies, subject to product rules. |
| Insurance Regulatory and Development Authority of India (IRDAI) | Statutory regulator for the Indian insurance sector. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
16. Life Insurance & Annuities
Study the exact meaning and practical application of these 12 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Term insurance | Life cover for a specified period subject to policy conditions. |
| Whole-life insurance | Life cover structured to last for the insured's life subject to the contract. |
| Endowment plan | Life policy combining insurance protection and a contractual maturity benefit. |
| Unit Linked Insurance Plan (ULIP) | Life insurance product with investment units and market-linked fund values. |
| Participating policy | Policy eligible for declared bonuses or surplus participation under terms. |
| Non-participating policy | Policy without entitlement to participating bonuses, subject to guaranteed or stated benefits. |
| Surrender value | Amount payable on early termination when contractual and regulatory conditions are met. |
| Paid-up policy | Policy continued with reduced or modified benefits after cessation of premiums under applicable terms. |
| Annuity | Series of periodic payments, commonly used to provide retirement income. |
| Mortality | Incidence of death in a defined population and period; key in life pricing. |
| Persistency ratio | Measure of how many insurance policies or premiums remain in force over a time interval. |
| Solvency margin—insurance | Excess of admissible assets over required liabilities under insurance regulation. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
17. General, Health & Motor Insurance
Study the exact meaning and practical application of these 12 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Indemnity | Principle of compensating a covered loss within policy limits rather than creating profit. |
| Insurable interest | Legally recognised financial or other qualifying interest in the insured risk. |
| Subrogation | Insurer's entitlement, after indemnification, to pursue certain insured recovery rights. |
| Contribution | Sharing of eligible insured losses across applicable insurance covers under relevant rules. |
| Third-party liability | Legal liability to another person covered within the policy's terms. |
| Own damage cover | Motor insurance for specified damage or loss affecting the insured vehicle. |
| Cashless claim | Eligible claim settled with a network service provider without upfront full payment by insured, subject to terms. |
| Network hospital | Hospital in an insurer or third-party administrator's contracted provider network. |
| Third-Party Administrator (TPA) | Licensed service provider handling specified health insurance administration and claims support. |
| Pre-existing disease (PED) | Health condition existing before policy inception as defined by current applicable regulations. |
| Room-rent sublimit | Contractual cap on eligible room accommodation charges or related claim calculation. |
| Restoration benefit | Reinstatement of specified cover after qualifying use, subject to terms. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
18. Capital Markets & Securities Regulation
Study the exact meaning and practical application of these 14 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Securities and Exchange Board of India (SEBI) | Statutory regulator for India's securities market and related intermediaries. |
| Primary market | Market for initial issuance of securities by issuers. |
| Secondary market | Market where previously issued securities are traded among investors. |
| Initial Public Offering (IPO) | First public offering of a company's equity securities under applicable rules. |
| Follow-on Public Offer (FPO) | Public issue of securities by an already listed issuer. |
| Rights issue | Offer of eligible additional securities to existing shareholders in a specified ratio. |
| Stock exchange | Recognised venue for trading eligible listed securities. |
| Depository | Organisation holding securities in electronic form and facilitating book-entry ownership transfers. |
| Depository Participant (DP) | Intermediary connecting investors with a securities depository. |
| Demat account | Account for holding securities in electronic form through depository arrangements. |
| ISIN | International Securities Identification Number identifying a securities issue. |
| Market capitalisation | Share price multiplied by outstanding shares under chosen share-count convention. |
| Circuit filter | Exchange or regulatory price-movement control applying to eligible instruments. |
| Insider trading | Trading or related prohibited conduct involving unpublished price-sensitive information under securities rules. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
19. Mutual Funds, Investment Products & Derivatives
Study the exact meaning and practical application of these 18 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Mutual fund | Pooled investment vehicle managed according to a defined scheme and regulatory framework. |
| Asset Management Company (AMC) | Company managing pooled mutual-fund scheme investments. |
| Net Asset Value (NAV) | Mutual fund scheme net assets divided by applicable outstanding units. |
| Assets Under Management (AUM) | Total market value of assets managed according to a stated reporting definition. |
| Expense ratio | Annualised scheme expenses charged relative to assets under applicable rules. |
| Systematic Investment Plan (SIP) | Method of investing predetermined amounts periodically into a mutual fund. |
| Systematic Withdrawal Plan (SWP) | Arrangement to redeem fund units systematically at intervals. |
| Exchange-Traded Fund (ETF) | Fund with units traded on an exchange and following its stated investment strategy. |
| Index fund | Fund seeking to track the performance of a specified index. |
| Equity | Ownership interest in a company represented by qualifying shares. |
| Debt security | Instrument representing issuer borrowing and holder creditor rights. |
| Derivative | Contract whose value depends on a specified underlying price, rate or index. |
| Futures | Standardised exchange-traded derivative for future settlement under exchange rules. |
| Option | Derivative granting specified rights to buy or sell, generally without the buyer's obligation to exercise. |
| Call option | Option giving its buyer the right, not obligation, to purchase the underlying under terms. |
| Put option | Option giving its buyer the right, not obligation, to sell the underlying under terms. |
| Strike price | Specified exercise price in an option contract. |
| Margin | Collateral or funds required to support relevant securities or derivative positions. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
20. Rural, Agriculture, MSME & Development Finance
Study the exact meaning and practical application of these 12 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| National Bank for Agriculture and Rural Development (NABARD) | Development financial institution supporting agriculture and rural development. |
| Small Industries Development Bank of India (SIDBI) | Principal financial institution focused on MSME promotion, financing and development. |
| Kisan Credit Card (KCC) | Framework for eligible agricultural credit facilities under prescribed conditions. |
| Self-Help Group (SHG) | Community-based small savings and credit collective, often linked with banks. |
| Joint Liability Group (JLG) | Group-based borrower arrangement relying on joint repayment support. |
| Priority Sector Lending (PSL) | Bank lending toward designated eligible sectors under RBI targets and criteria. |
| Microfinance | Small-scale financial services for eligible low-income borrowers under applicable regulation. |
| MUDRA | Micro Units Development and Refinance Agency initiative supporting eligible micro-enterprise finance. |
| Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) | Guarantee programme for eligible MSME credit under scheme terms. |
| Trade Receivables Discounting System (TReDS) | Electronic mechanism for financing eligible MSME trade receivables. |
| Factoring | Financing or purchase of trade receivables under agreed conditions. |
| Refinance | Funding provided to eligible lending institutions against qualifying underlying lending. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
21. Financial Markets, Regulators & Institutions
Study the exact meaning and practical application of these 12 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Reserve Bank of India (RBI) | India's central bank and regulator of specified financial institutions and payment systems. |
| SEBI | Securities and Exchange Board of India, regulator for securities markets. |
| IRDAI | Insurance Regulatory and Development Authority of India, regulator for insurance. |
| Pension Fund Regulatory and Development Authority (PFRDA) | Regulator for the National Pension System and covered pension schemes. |
| International Financial Services Centres Authority (IFSCA) | Unified regulator for specified financial services in India's international financial services centres. |
| National Housing Bank (NHB) | Institution supporting housing-finance development and specified sectoral functions. |
| Export-Import Bank of India (EXIM Bank) | Development finance institution supporting India's external trade and investment. |
| Deposit Insurance and Credit Guarantee Corporation (DICGC) | Insures eligible bank deposits up to the statutory limit under applicable rules. |
| National Pension System (NPS) | Regulated defined-contribution pension framework with investment-linked retirement savings. |
| Pension fund | Investment manager or vehicle administering specified retirement assets. |
| Financial Stability and Development Council (FSDC) | High-level Indian forum on financial stability, development and inter-regulatory coordination. |
| International Financial Services Centre (IFSC—financial centre) | Designated jurisdiction for regulated international financial services; distinct from bank IFSC payment code. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
MAGME SCHOOL OF BANKING™ · FULL BFSI TERMINOLOGY
22. Exam-Focused Formulas & High-Yield Contrasts
Study the exact meaning and practical application of these 14 important terms. Definitions are designed for conceptual understanding and competitive examination revision; institution-specific rules and changing rates must be checked against current official directions.
| Term / abbreviation | Definition and examination relevance |
|---|---|
| Simple interest (SI) | Principal × annual rate × time when units and simple-interest assumptions match. |
| Compound amount | P(1+r/n)^(nt) for nominal annual rate r compounded n times per year over t years. |
| EMI formula | P × i × (1+i)^n ÷ [(1+i)^n − 1] for constant periodic rate i and n payments. |
| Gross NPA ratio | Gross NPAs ÷ gross advances × 100 under the reporting definition. |
| CASA ratio formula | Current and savings deposits ÷ total deposits × 100. |
| Credit–deposit ratio formula | Gross advances ÷ relevant deposits × 100 under the reporting definition. |
| CRR versus SLR | CRR is a cash reserve requirement with RBI; SLR is a prescribed liquid-assets holding requirement. |
| Repo versus reverse repo | Repo is secured borrowing through sale and repurchase; reverse repo is the counterparty leg. |
| Liquidity versus solvency | Liquidity is ability to meet due payments; solvency concerns the capacity of assets and capital to cover liabilities. |
| NPA versus write-off | NPA is prudential loan classification; write-off is accounting treatment and not automatic debt waiver. |
| NEFT versus RTGS | NEFT operates batch settlement; RTGS settles qualifying transactions individually in real time. |
| Insurance premium versus sum insured | Premium is price of insurance; sum insured is the defined coverage amount or limit. |
| NAV versus market price | NAV measures per-unit net asset value; traded ETF or share prices depend on market transactions. |
| IFSC code versus IFSC authority | Bank payment code and international financial services centre share an abbreviation but mean different things. |
Exam strategy: Compare closely related terms, identify the responsible regulator and check whether the expression describes a product, institution, legal status, accounting item or regulatory measurement.
QUICK CLARIFICATIONS
Frequently Asked Questions
Is this only a banking glossary?
No. It includes banking, financial markets, securities, insurance, pensions, payments, rural and development finance, and regulatory terminology.
Are the terms arranged alphabetically?
They are arranged by subject, with an instant term search and alphabetical quick-search support.
Does a scheduled bank always belong to government?
No. Scheduled status and public/private ownership are separate classifications.
Is a bank fixed deposit an asset or liability?
For the bank it is a liability; for the depositor it is an asset.
Are repo and reverse repo always different fixed policy rates?
They describe opposite sides of secured repurchase transactions. Distinguish these concepts from operational RBI corridor facilities and current announced rates.
Is a credit score a guarantee of loan approval?
No. A lender also evaluates affordability, exposure, policy and other risk factors.
Does a write-off eliminate the debt?
Not necessarily. An accounting write-off alone is not a legal waiver.
What is the difference between sum assured and sum insured?
Both describe contractual cover or benefit concepts, but usage and payment mechanisms differ across life and general insurance products.
What is the difference between stock exchange and depository?
An exchange facilitates trading, while a depository facilitates electronic holding and book-entry transfer of securities.
Do NAV and market price always match?
No. NAV is net scheme assets per unit; a traded fund unit can have a distinct market price.
Can payment banks lend?
No, payments banks cannot undertake lending under their differentiated licence.
Are all NBFC deposits insured by DICGC?
No. DICGC bank-deposit cover does not ordinarily extend to NBFC deposits.
What is the distinction between IFSC meanings?
IFSC can mean the Indian Financial System Code or an International Financial Services Centre; context is essential.
Are regulations and transaction limits constant?
No. Applicable limits, facilities and regulations can change. Always consult current RBI, SEBI, IRDAI, PFRDA and NPCI documents.
PRACTICE · CONCEPTS & COMPARISONS
25 Interactive BFSI Terminology MCQs
Test vocabulary across all BFSI verticals. Choose A–D, submit to view your score and answer-wise explanations, or reset for another attempt.
PRIMARY SOURCES · VERIFY CHANGING RULES
Official References & Further Reading
Reviewed 12 November 2026. This is an educational terminology guide, not a substitute for operative legal definitions, product terms or current circulars. The source list links to the responsible official authorities; rates, thresholds and operational restrictions are deliberately not presented as permanent facts.