• Banking Terms – P

    Term

    Meaning

    Par Value The face value of a security which the investor is expected to receive at the time of maturity with coupon or interest rates if applicable.
    Partially Amortizing Loan Partially Amortizing loan is a loan in which the periodic payments cover all of the interest charges but only part of the principal, therefore leaving an unpaid principal balance when the loan matures.
    Participation Participation is nothing but many banks will involve in one loan sanctioning. Customer will not aware of the participated bank details but they will know the bank who originated their loans.
    Participation Bought If the Bank is bought the participation from Other Bank who is the Loan Originator, then it is called Participation Bought.
    Participation Certificates (PCs) The major activity of a bank is credit accommodation. This service of the banks, apart from increasing the risks, may place them in a tight liquidity position. To ease their liquidity, banks have the option to share their credit asset(s) with other banks by issuing Participation Certificates. These certificates are also known as interbank participations (IBPs).
    Participation Sold If the Originator bank decides to involve some other banks also in loan process and sold their participation, then it is called Participation Sold.
    Participatory Notes (PNs) Participatory Notes (PNs) are a derivative instrument issued by the FIIs to their overseas clients, who are not registered with the Indian regulators.
    Passbook It’s a record for the customer of how many transaction either debit or credit along with the details of the same.
    Past Due Loan on which payments had not made on time. E.g. Estimated Date is 9 Sep, but they failed to pay the loan amount. Then on 10th Sep it will be treated as Past due loans.
    Pay down Repaying part of the outstanding loan Balance.
    Pay off Statement It’s also referred as letters of demand. It will show all the remaining balance details, Remaining terms, Interest Rate of the loans. Banks will prepare this only if the customer planned to pay off the amount early.
    Payable if Desired A PID agreement is maintained between banks for processing the check. When a transit check arrives to the bank, the bank checks for the agreement file of the originator bank. If the agreement file is not available, then the check will not be sent to clearing house for clearing.
    Payee The individual or a company to whom the check is written and who will receive the amount after depositing the check.
    Payer The individual or a company who writes and deposits the amount and gives the check to the person who needs to receive the amount.
    Payoff Repaying the complete loan amount in scheduled time or in one or more pre-payments.
    PAYPASS Paypass is used as alternative for cards. Rather than swiping the card (debit, credit, master card) after each purchase the payment can be made by tapping a pay pass in a payment device to the merchant. There is no fee collected for using Paypass instead of cards. It is safe and secure to use Paypass instead of card.
    Penalty An extra payment for not satisfying the contract.
    Penny Stocks Penny stocks is a term used to define cheaply available stocks of typically loss-making companies. Penny stock is used in the context of general equities. The stocks that typically sell for less than $1 share, although it may rise to as much as $10/share after the Initial Public Offering (IPO), usually because of heavy promotion.
    Perfect Competition Perfect competition is the market in which there are many firms selling identical products with no firm large enough relative to the entire market to be able to influence market price.
    Perpetual Bonds Bonds with no maturity date.
    Personal Check It is the check drawn on a depositor institution by an individual against the individuals own funds.
    Personal Identification Number (PIN) Personal Identification Number is a secret number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .
    Personal Loan An unsecured loan usually made for the purpose of debt consolidation, vacation or the purchase of durable goods. It is also called a signature loan.
    Placing  Obtaining subscriptions for, or the sale of, primary market, where the new securities of issuing companies are initially sold.
    Plastic Money Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.
    Pledge A bailment of goods as security for payment of a debt e.g pledge of stock by a borrower to a banker for a credit limit.
    Point of sale (POS) POS stands for Point of Sale. It is the location where the transaction occurs. POS limit is the daily limit set by the bank for the customer. It is the limit that the customer can spend using his credit or debit card.
    Points/Discount The fee you pay up front to the lender at the time of closing. Each point you pay will equal one percent of your mortgage amount and for each point paid, your interest will normally drop by one-quarter of a percentage point. For example, if you are taking out a mortgage of $200,000 and were to pay 2 points at closing to get an interest reduction of ½ of a percent, you would need to pay $4,000 for those points. Costs like origination fees can also be expressed in points.
    Portfolio Group of Investments held by investors.
    Portfolio Lenders Any institution that lends its own money and originates loans for themselves is called a portfolio lender.
    Portfolio Risk This is the risk that in a given loan portfolio borrowers may not be able to repay. The lender would generally like to have mathematical estimate of such default e.g. in a home loans portfolio risk of default may be 1% of total portfolio value.
    Positive Pay An anti fraud service offered by US commercial banks to detect fraudulent checks. It is the process which matches the check number, amount, and account number presented for payment against the list of checks previously issued by the company to the bank. Any check found to be fraudulent will be sent back to issuer for examination. Issuing company sends the check number, amount, account number and date of all the issued checks to the bank in a file. The bank then compares the check will is arrived for clearing with the check list, if there is any mismatch then the check is rejected for payment.
    Postdate Normally used for cheques submitted later which is relative to the before payment.
    Pot is clean This is a slang phrase which refers to a situation where in a managing underwriter sells of all the available issues of the securities offered by the issuing company has been sold to the interested investors. Formally it is known as ‘Fully Subscribed’. In case, all the securities have been issued and there is still interest in the issue, it means that the issue was probably underpriced and oversubscribed.
    PQLI PQLI is known as Physical Quality of Life Index which is used to assess the level of social development.
    Pre-Authorized Payment Customers account is debited on a preauthorization from the customer. This preauthorization takes place in case loan payment or bill payment. This authorization from the customer will have the payment amount, credit account details and date. So that bank will debit customers account on the particular date with the amount mentioned in authorization agreement.
    Precision Marketing Sending the right message to the right people, through the right channel, and at the right point in time, is called precision marketing.
    Preference Shares  A corporate security that pays a fixed dividend each period.During liquidation it gets preference after bonds but over the common equity shares.
    Premature Withdrawals When terms deposits like Fixed Deposits, Call Deposits and Recurring Deposits are sought to be withdrawn before maturity , it is premature withdrawal.
    Premium The price of an option is called its premium. So if you buy an option, you pay a premium, whereas if you sell an option (write an option), you receive a premium. The potential loss to the buyer of an option can be no greater than the initial price paid.
    Premium Bond Bond selling above its par value
    Prepayment Prepayment is repayment of the total loan amount by a property owner whose mortgage is backing a mortgage-backed security (MBS).It is actually the payment made before its scheduled due date.
    Prepayment This is the right of the borrower to repay the loan before its maturity. If the interest rates decrease, the borrower may prepay the loan and get it refinanced at the lower interest rate.
    Pre-Qualification A preliminary stage prior to bidding process, where the applicant is verified of whether he has the resources and the ability to do a given job.
    Present Value Present value is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk. Present value calculations are widely used in business and economics to provide a means to compare cash flows at different times on a meaningful “like to like” basis.
    Previous Balance Previous balance is an outstanding amount which appears on the credit card statement on date when it is generated.
    Price/Earnings Ratio (P/E) The measure to determine how the market is pricing the company’s common stock. The price/earnings (P/E) ratio relates the company’s earnings per share (EPS) to the market price of its stock.
    Primary Market Primary market mainly deals with the initial public offerings of the shares. Companies use primary market to launch IPO and FPOs to raise money from the investors.
    Primary Offering The security issued by the company for the very first time to the public is called Primary Offering. The proceeds of the sale are received by the company. The capital raised through private offering helps the company to expand its business operations. Usually, the Initial Public Offering refers only to Primary Offering.
    Primary Security Primary Security is the asset, the purchase of which has been financed by the lender. Thus, in case of a car loan, the car purchased by the borrower is the primary security.
    Prime Banks will use one procedure to determine which type of loans a customer will fit based on FICO Score. If the score is more than 620, then they are eligible for Prime loan. Prime Rate is the rate that bank follows for the Eligible customers.
    Prime Lending Rate This is the rate of interest at which the most creditworthy borrowers of the bank are offered loans and it is the minimum rate of interest charged by the bank. This rate includes a minimum amount towards credit risk [which is considered non-existent in case of prime borrowers].
    Prime Lending Rate (PLR) The rate at which banks lend to their best (prime) customers.
    Principal The principal is the amount of money borrowed. It is also the base on which interest is figured. Usually, each mortgage payment pays both some principal and interest, although there are interest only mortgages.
    Principal Balance The portion of a loan not yet repaid, exclusive of interest or other charge is known as Principal Balance. It is actually the outstanding balance of principal on a mortgage, which does not include interest or other charges.
    Priority Sector Advances Consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organizations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.
    Private Mortgage Insurance (PMI) Mortgage insurance provided by nongovernmental insurers that protects a lender against loss if the borrower defaults.
    Privatization The sale of government-owned equity in nationalized industry or other commercial enterprises to private investors.
    Promissory Note Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.
    Proposal This is the written request for sanction of loan and the request is accompanied by various documents in support of the loan request. The proposal is prepared in a standard format finalized by the lender.
    Provisioning  Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification and make appropriate provisions for likely losses in their balance sheets.
    Provisioning Requirements This refers to the amount of income that the bank has to set aside for writing off loan losses during the financial year. It also takes into account the amount of capital required to support loans business of the bank. For example, if the bank has a portfolio of loans of USD 100 million, it may be required to set aside USD 10 million in the form of capital and another USD 10Millions may be required annually to write off loan losses.
    PSB Public Sector Banks
    Public Debt Public debt represents borrowing by the state and public authorities. All loans taken by the public authorities constitute public debt.
    Public Offering Price The price at which new securities offering is given for public by the issuer. These prices generally change on a day to day basis.  The public offering price is decided based on several factors- the profitability of the company, the trends in public, financial statements of the company, its growth rate and confidence of the investor’s confidence in the public. It is also known as Ask Price.
    Public Sector Public sector signifies those undertakings which are owned, managed and run by public authorities. Public sector includes direct government enterprise, the nationalized industries and public corporations. In this sector of the economy the government acts itself as an entrepreneur.
    Public Sector Bank A bank fully or partly owned by the Government.
    PUD (Planned Unit Development) A Planned Unit Development, or PUD, is both a type of building development as well as a regulatory process. A PUD is a designed grouping of varied and compatible land uses, such as housing, recreation, commercial centers, and industrial parks, all within one contained development or subdivision. It is a real estate project in which each unit owner has title to a residential lot and a nonexclusive easement on the common areas of the project.
    Put Option The right to sell the underlying securities at a specified exercise price on of before a specified expiration date.

     

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