• Banking Terms – I



    IFSC Code Indian Financial System Code or IFSC code is an eleven character code assigned by RBI to identify every bank branches uniquely, that are participating in NEFT system in India
    Impound Account Impound account is synonymous to ESCROW account.
    Indemnifier  When a person indemnifies or guarantees to compensate any loss caused to the lender from his actions or others’ actions.
    Indemnity Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.
    Independent Brokers The majority of independent brokers are “direct access” brokers who deal with the institutional public at low commission rates.
    Independent Director  An independent Director is a non-executive Director on the board of a company who has integrity, expertise and independence to balance the interests of the various stakeholders. The main reason of independent directors is to protect shareholders’ interest in the decision making and to improve the corporate governance in a company.
    Index Index is the published interest rate – such as the Prime Rate, LIBOR, T-Bill rate, or the 11th District COF – against which lenders compare other investments. Lenders use an index to establish and adjust interest rates on adjustable mortgages.
    Index Fund Index Funds are the mutual funds that hold shares in proportion to their representation in a market index, such as the S&P 500, Nifty etc.
    Index Trading Index trading provides a facility of buying and selling of stock exchange indices in terms of securities that comprise the index.
    Index-ARM An adjustable rate mortgage (ARM) is a mortgage where your interest rate and monthly payment vary over time.
    Indirect Lending When the loan is originated by say a dealer, the application for loan is sent to the bank by the dealer who interacts with the prospective borrower. This is indirect lending involving three parties, namely the prospective borrower, the dealer and the bank.
    Inflation Inflation is the continuous increase in price of goods and products over a period of time. When the price of general articles or items goes up, it reduces the value of the domestic currency as the same currency is able to buy lesser quantity because of price increases.
    Initial Public Offering (IPO) The first sale of the stock to raise money from the share market which helps a company to get listed on the stock exchange is called Initial Public Offerings (IPO). Through public offering the shares are offered to general public or the retail investors.
    Initial Public Offering (IPO) It is the first sale of stock by a company to the public. The companies sell the stock so as to acquire more capital. This is usually done by smaller companies trying to expand by means of the capital acquired by the sale of the stocks. However, this can also be done by large private owned companies trying to become a Public company. This sale is generally done through a stock exchange. The pricing of the stock value is important as if it is priced high, then the potential buyers will be discouraged and if priced low, the company incurs loss. Once the IPO is finalized, the company becomes Public held as stocks of the company are now held by the public.
    Insider The Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2008, defines an “insider” as any person who
    (i) is or was connected with the company or is deemed to have been connected with the company and who is reasonably expected to have access to unpublished price-sensitive information in respect of securities of a company, or
    (ii) has received or has had access to such unpublished price sensitive information”
    Insider Trading Trading activities performed based on Insider information which is illegal as per stock market regulations.
    Insolvent  Insolvent is a person who is unable to pay his debts when they become due. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.
    Installment Contract An installment contract is a contract where the borrower pays a series of periodic installments that includes the interest of the principal amount.
    Installment Credit Installment credit is a debt or loan that is to be returned to the lender in a set of periodic installments. Auto loans, home loans and other types of loans are included in installment credit.
    Interest The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate. Here, interest per year divided by principal amount, expressed as a percentage. It is also called interest rate.
    Interest Accrual Rate The interest accrual rate is a percentage of interest that is calculated on the basis of the rate of interest and is expressed in terms of annual percentage rate or APR.
    Interest bearing The financial requirement on which the interest is paid.
    Interest Rate The rate charged for the use of borrowed money. The interest rate is expressed as a percentage of the amount borrowed.
    Interest Rate Cap These are the limits put on an adjustable rate loan which preclude the interest rate on the loan from increasing beyond a certain level in a given time period and the maximum level it can touch during the life of the loan.
    Interest Rate Swaps (IRS) Interest rate swap is the most common type of swap which is called the “Plain Vanilla”. It is nothing but an exchange of fixed rate loan with a floating rate loan or vice versa. This is used to get the comparative advantage in the loan market to avail loan at the cheapest interest rate.
    Interest Warrant When cheque is given by a company or an organization in payment of interest on deposit, it is called interest warrant.
    Inter-exchange arbitrage This is popular among liquid commodities like gold and silver, where the arbitrage can take place between the Indian exchanges and the foreign exchanges, where contract specifications are similar.
    Interim Interest It is the interest accrued right from the closing date up to the end of the month.
    Internet Banking Internet banking is a system which enables the customers to  conduct their all banking related transactions through the Internet. Also known as Online banking.
    Intrinsic Value It is the difference between the exercise price of an option and the market value of the underlying instrument. Options that are at the money or out of the money have no intrinsic value.
    Introductory rate It’s the rate which will be for temporary period, after the introductory period the rate will increase to the standard percentage.
    Investment Adviser  An expert who provides investment advice with respect to securities and is registered with the relevant regulator as an investment adviser.
    IPO price he price at which shares are offered in the primary market during Initial Public Offering. Later, the stock price is determined by supply and demand.
    IRC Internal Revenue Code which tells about the tax liabilities and deduction.
    IRS IRS is Internal Revenue Service. It’s a government Agency which is responsible for collecting federal taxes and administering tax rules.
    IRS It is a US government agency that collects taxes and enforces the internal revenue laws. It is bureau of the Department of Treasury.
    Islamic Banking Islamic banking is same as conventional banking except that it follows principles of Shariah (Islamic law). The banking activity and all the transactions have to completely abide to Shariah rules.
    The very source of Shariah rules is the holy ‘Quran’ and the teachings and followings by Islamic learned scholars. The Islamic law prohibits interest on both the loans and the deposits. Interest is also called ‘riba’ in Islamic discourse. The argument against interest is that money is not good and profit should be earned on goods and services only and not on control of money itself.
    Issuing bank It is the bank which offers payment cards directly to consumers.


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