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Banking Terms used in Bangladesh

Banking Terms used in Bangladesh

A

Account Agreement:

The contract governing your open-end credit account, it provides information on changes that may occur to the account.

Account History:

The payment history of an account over a specific period of time, including the number of times the account was past due or over limit.

Account Holder:

Any and all persons designated and authorized to transact business on behalf of an account. Each account holder's signature needs to be on file with the bank. The signature authorizes that person to conduct business on behalf of the account.

Accrued Interest:

Interest that has been earned but not yet paid.

Adverse Action:

Under the Equal Credit Opportunity Act, a creditor's refusal to grant credit on the terms requested, termination of an existing account, or an unfavorable change in an existing account.

Adverse Action Notice:

The notice required by the Equal Credit Opportunity Act advising a credit applicant or existing debtor of the denial of their request for credit or advising of a change in terms considered unfavorable to the account holder.

Affidavit:

A sworn  statement in writing before a proper official, such as a notary public.

Alteration:

Any change involving an erasure or rewriting in the date, amount, or payee of a check or other negotiable instrument.

Amortization:

The process of reducing debt through  regular installment payments of principal and interest that will result in the payoff of a loan at its maturity.

Annuity:

A life insurance contract sold by insurance companies, brokers, and other  financial institutions. It is usually sold as a retirement investment. An annuity is a long-term investment and can have steep surrender charges and penalties for withdrawal before the annuity's maturity date. (Annuities are not FDIC insured.)

Application:

Under the Equal Credit Opportunity Act (ECOA), an oral or written request for an extension of credit that is made in accordance with the procedures established by a creditor for the type of credit requested.

Appraisal:

The act of evaluating and setting the value of a specific  piece of personal or real property.

Authorization:

The issuance of approval , by a credit card issuer, merchant, or other affiliate, to complete a credit card transaction.

Automated Clearing House (ACH):

A computerized facility used by member depository institutions to electronically combine, sort, and distribute inter-bank credits and debits. ACHs process electronic transfers of government securities and provided customer services, such as direct deposit of customers' salaries and government benefit payments (i.e., social security, welfare, and veterans' entitlements), and preauthorized transfers.

Automated Teller Machine (ATM):

A machine, activated by a magnetically encoded card or other medium, that can process a variety of banking transactions. These include accepting deposits and loan payments, providing withdrawals, and transferring funds between accounts.

Automatic Bill Payment:

A checkless system for paying recurring  bills with one authorization statement to a financial institution. For example, the customer would only have to provide one authorization form/letter/document to pay the cable bill each month. The necessary debits and credits are made through an Automated Clearing House (ACH).

Availability Date:

Bank's policy as to when funds deposited into an account will be available for withdrawal.

Availability Policy:

Bank's policy as to when funds deposited into an account will be available for withdrawal.

Available Balance:

The balance of an account less any  hold, uncollected funds, and restrictions against the account.

Available Credit:

The difference between the credit limit assigned to a cardholder account and the present balance of the account.

B

Balance Transfer:

The process of moving an outstanding balance from one credit card to another. This is usually done to obtain a lower interest rate on the outstanding balance. Transfers are sometimes subjected to a Balance Transfer Fee.

Bank Custodian:

A bank custodian is responsible for maintaining the safety of clients' assets held at one of the custodian's premises, a sub-custodian facility or an outside depository.

Bank Statement:

Periodically the bank provides a statement of a customer's deposit account. It shows all deposits made, all checks paid, and other debits posted during the period (usually one month), as well as the current balance.

Banking Day:

A business day during which an office of a bank is open to the public for substantially all of its banking functions.

Bankrupt:

A bankrupt person, firm, or corporation has insufficient assets to cover their debts. The debtor seeks relief through a court proceeding to work out a payment schedule or erase debts. In some cases, the debtor must surrender control of all assets to a court-appointed trustee.

Bankruptcy:

 The legal proceedings by which the affairs of a bankrupt person are turned over to a trustee or receiver for administration under the bankruptcy laws. There are two types of bankruptcy:

• Involuntary bankruptcy-one or more creditors of an insolvent debtor file a petition having the debtor declared bankrupt.

• Voluntary bankruptcy-the debtor files a petition claiming inability to meet financial obligations and willingness to be declared bankrupt.

Beneficiary:

A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract.

Billing Date:

The month, date, and year when a periodic or monthly statement is generated. Calculations have been performed for appropriate finance charges, minimum payment due, and new balance.

Billing Error:

A charge that appears on a periodic statement associated with an extension of credit (e.g., credit card) that

• was not authorized by the cardholder or the cardholders' designee,

• is not properly identified, and

• was not accepted by the cardholder or the cardholder's designee.

A billing error can also be caused by a creditor's failure to credit a payment or other credit to an account as well as accounting and clerical errors.

Business Day:

Any day on which offices of a bank are open to the public for carrying on substantially all of the bank's business.

C

Canceled Check :

A check that a bank has paid, charged to the account holder's account, and then endorsed. Once canceled, a check is no longer negotiable.

Certified Check:

A personal check drawn by an individual that is certified (guaranteed) to be good. The face of the check bears the words "certified" or "accepted," and is signed by an official of the bank or thrift institution issuing the check. The signature signifies that

• the signature of the drawer is genuine, and

• sufficient funds are on deposit and earmarked for payment of the check.

Charge-off:

The balance on a credit obligation that a lender no longer expects to be repaid and writes off as a bad debt.

Check:

A written order instructing a financial institution to pay immediately on demand a specified amount of money from the check writer's account to the person named on the check or, if a specific person is not named, to whoever bears the check to the institution for payment.

Checking Account:

A demand deposit account subject to withdrawal of funds by check.

Closing Costs:

The expenses incurred by sellers and buyers in transferring ownership in real property. The costs of closing may include the origination fee, discount points, attorneys' fees, loan fees, title search and insurance, survey charge, recordation fees, and the credit report charge.

Collateral:

Assets that are offered to secure a loan or other credit. For example, if you get a real estate mortgage, the bank's collateral is typically your house. Collateral becomes subject to seizure on default.

Collected Funds:

Cash deposits or checks that have been presented for payment and for which payment has been received.

Collection Agency:

A company hired by a creditor to collect a debt that is owed. Creditors typically hire a collection agency only after they have made efforts to collect the debt themselves, usually through letters and telephone calls.

Collection Items:

Items-such as drafts, notes, and acceptances-received for collection and credited to a depositor's account after payment has been received. Collection items are usually subject to special instructions and may involve additional fees. Most banks impose a special fee, called a collection charge, for handling collection items.

Co-Maker:

A person who signs a note to guarantee a loan made to another person and is jointly liable with the maker for repayment of the loan. (Also known as a Co-signer.)

Consumer Reporting Agency:

An agency that regularly collects or evaluates individual consumer credit information or other information about consumers and sells consumer reports for a fee to creditors or others. Typical clients include banks, mortgage lenders, credit card companies, and other financing companies.

Co-Signer:

An individual who signs the note of another person as support for the credit of the primary signer and who becomes responsible for the obligation. (Also known as a Co-maker.)

Credit Application:

A form to be completed by an applicant for a credit account, giving sufficient details (residence, employment, income, and existing debt) to allow the seller to establish the applicant's creditworthiness. Sometimes, an application fee is charged to cover the cost of loan processing.

Credit Card Account Agreement:

A written agreement that explains the

• terms and conditions of the account,

• credit usage and payment by the cardholder, and

• duties and responsibilities of the card issuer.

Credit Card Issuer:

Any financial institution that issues bank cards to those who apply for them.

Credit Limit:

The maximum amount of credit that is available on a credit card or other line of credit account.

Credit Report:

A detailed report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Credit Score:

A number, roughly between 300 and 800, that measures an individual's credit worthiness. The most well-known type of credit score is the FICO® score. This score represents the answer from a mathematical formula that assigns numerical values to various pieces of information in your credit report.

Banks use a credit score to help determine whether you qualify for a particular credit card, loan, or service.

Cut-Off Time:

A time of day established by a bank for receipt of deposits. After the cut-off time, deposits are considered received on the next banking day.

D

Debit:

A debit may be an account entry representing money you owe a lender or money that has been taken from your deposit account.

Debit Card:

A debit card allows the account owner to access their funds electronically. Debit cards may be used to obtain cash from automated teller machines or purchase goods or services using point-of-sale systems. The use of a debit card involves immediate debiting and crediting of consumers' accounts.

Debtor:

Someone who owes monies to another party.

Debt-to-Income Ratio (DTI):

The percentage of a consumer's monthly gross income that goes toward paying debts. Generally, the higher the ratio, the higher the perceived risk. Loans with higher risk are generally priced at a higher interest rate.

Deferred Payment:

A payment postponed until a future date.

Demand Deposit:

A deposit of funds that can be withdrawn without any advance notice.

Deposit Slip:

An itemized memorandum of the cash and other funds that a customer presents to the bank for credit to his or her account.

Direct Deposit:

A payment that is electronically deposited into an individual's account at a depository institution.

Direct Dispute:

A dispute submitted directly to the furnisher about the accuracy of information in your consumer report that relates to an account or other relationship you have with the furnisher.

Disclosures:

Certain information that Federal and State laws require creditors to give to borrowers relative to the terms of the credit extended.

Draft:

A signed, written order by which one party (the drawer) instructs another party (the drawee) to pay a specified sum to a third party (the payee), at sight or at a specific date. Typical bank drafts are negotiable instruments and are similar in many ways to checks.

Drawee:

The person (or bank) who is expected to pay a check or draft when it is presented for payment.

Drawee bank:

The bank upon which a check is drawn.

Drawer:

The person who writes a check or draft instructing the drawee to pay someone else.

E

Electronic Banking:

A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's Web site on the Internet. (This is also known as Internet or online banking.)

Electronic Funds Transfer (EFT):

The transfer of money between accounts by consumer electronic systems-such as automated teller machines (ATMs) and electronic payment of bills-rather than by check or cash. (Wire transfers, checks, drafts, and paper instruments do not fall into this category.)

Encoding:

The process used to imprint or inscribe MICR characters on checks, deposits, and other financial instruments. [Magnetic Ink Character Recognition (MICR) is a character-recognition technology adopted mainly by the banking industry to facilitate the processing of checks. Each check in encoded at the bottom with the dollar amount of the check. If that information is entered incorrectly, there is an encoding error.]

Error Resolution:

The required process for resolving errors involving electronic transfers to and from deposit accounts.

F

Finance Charge:

The total cost of credit a customer must pay on a consumer loan, including interest. The Truth in Lending Act requires disclosure of the finance charge.

Financial Regulatory Agency:

An organization authorized by statute for ensuring the safe and sound operation of financial institutions chartered to conduct business under that agency's jurisdiction.

First Mortgage:

A real estate loan which is in a first lien position, taking priority over all other liens. In case of a foreclosure, the first mortgage will be repaid before any other mortgages.

Fixed Rate Loan:

The interest rate and the payment remain the same over the life of the loan. The consumer makes equal monthly payments of principal and interest until the debt is paid in full.

Fixed Rate Mortgage:

A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.

Float:

1) The amount of uncollected funds represented by checks in the possession of one bank but drawn on other banks. 2) The time that elapses between the day a check is deposited and the day it is presented for payment to the financial institution on which it is drawn.

Flood Insurance:

Flood insurance protects against water from an overflowing river or a hurricane's tidal surge and also covers damage from water that builds up during storms.

Foreign Transaction Fees:

A fee assessed by your bank for making a transaction at another bank's ATM.

Forged Check:

A check on which the drawer's signature has been forged.

Forgery:

The fraudulent signing or alteration of another's name to an instrument such as a deed, mortgage, or check. The intent of the forgery is to deceive or defraud.

Frozen Account:

An account on which funds may not be withdrawn until a lien is satisfied and a court order or other legal process makes the account available for withdrawal (e.g., the account of a deceased person is frozen pending a court order distributing the funds to the new lawful owners).

An account may also be frozen when there is a dispute regarding the true ownership of an account. The bank will freeze the account to preserve the existing funds until legal action can determine the lawful owner.

G

Garnishment/Garnish:

A legal process that allows a creditor to remove funds from your bank account to satisfy a debt that you have not paid. If you owe money to a person or company, they can obtain a court order directing your bank to take money out of your account to pay off your debt.

Guarantor:

A party who agrees to be responsible for the payment of another party's debts should that party default.

H

Hold:

Used to indicate that a certain amount of a customer's balance may not be withdrawn until an item has been collected, or until a specific check or debit is posted.

Hold in due course:

I

Inactive Account:

An account that has little or no activity; neither deposits nor withdrawals having been posted to the account for a significant period of time.

Individual Account:

An account in the name of one individual.

Insufficient Funds:

When a depositor's checking account balance is inadequate to pay a check presented for payment.

Insurance:  

Insurance to protect the homeowner and the lender against physical damage to a property from sources such as but not limited to fire, wind, or vandalism.

Interest:

The term interest is used to describe the cost of using money, a right, share, or title in property.

Interest Rate:

The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures.

J

Joint Account:

An account owned by two or more persons. Either party can conduct transactions separately or together as set forth in the deposit account contract.

K

Kiting:

Writing a check in an amount that will overdraw the account but making up the deficiency by depositing another check on another bank. For example, mailing a check for the mortgage when your checking account has insufficient funds to cover the check, but counting on receiving and depositing your paycheck before the mortgage company presents the check for payment.

L

Late Charge:

The fee charged for delinquent payment on an installment loan, usually expressed as a percentage of the loan balance or payment. Also, a penalty imposed by a card issuer against a cardholder's account for failing to make minimum payments.

Lease:

A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent).

Lender:

An individual or financial institution that lends money with the expectation that the money will be returned with interest.

Lien:

Legal claim against a property. Once the property is sold, the lien holder is then paid the amount that is owed.

Line of Credit:

A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit.

Loan Contract:

The written agreement between a borrower and a lender in which the terms and conditions of the loan are set.

Loan Fee:

A fee charged by a lender to make a loan (in addition to the interest charged to the borrower).

Loan Proceeds:

The net amount of funds that a lending institution disburses under the terms of a loan, and which the borrower then owes.

M

Maturity:

The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable.

Minimum Balance:

The amount of money required to be on deposit in an account to qualify the depositor for special services or to waive a service charge.

Minimum Payment:

The minimum dollar amount that must be paid each month on a loan, line of credit, or other debt.

Missing Payment:

A payment that has been made but not credited to the appropriate account.

Money Market Deposit Account:

A savings account that offers a higher rate of interest in exchange for larger than normal deposits. Insured by the FDIC, these accounts have limits on the number of transactions allowed and may require higher balances to receive the higher rate of interest.

Money Market Fund:

An open-ended mutual fund that invests in short-term debts and monetary instruments such as Treasury bills and pays money market rates of interest. Money market funds usually offer checkwriting privileges. They are not insured by the FDIC.

Mortgage:

A debt instrument used in a real estate transaction where the property is the collateral for the loan. A mortgage gives the lender a right to take possession of the property if the borrower fails to pay off the loan.

Mortgage Loan:

A loan made by a lender to a borrower for the financing of real property.

Mortgagee:

The lender in a mortgage loan relationship.

Mortgagor:

The borrower in a mortgage loan relationship. (Property is used as collateral to make payment.)

Mutual Fund:

A fund operated by an investment company that raises money from shareholders and invests it in stocks, bonds, options, commodities, or money market securities. These funds offer investors the advantages of diversification and professional management. To participate, the investor may pay fees and expenses. (Mutual funds are not covered by FDIC insurance.)

N

National Bank:

A bank that is subject to the supervision of the Comptroller of the Currency. The Office of the Comptroller of the Currency is a bureau of the U.S. Treasury Department. A national bank can be recognized because it must have "national" or "national association" in its name.

O

Official Check:

A check drawn on a bank and signed by an authorized bank official. (Also known as a cashier's check.)

Offset, Right of:

Banks' legal right to  seize funds that a guarantor or debtor may have on deposit to cover a loan in default. It is also known as right of setoff

Online Banking:

A service that allows an account holder to obtain account information and manage certain banking transactions through a personal computer via the financial institution's web site on the Internet. (This is also known as Internet or electronic banking.)

Open-End Credit:

A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. (Also called a charge account or revolving credit.)

Overdraft:

When the amount of money withdrawn from a bank account is greater than the amount actually available in the account, the excess is known as an overdraft, and the account is said to be overdrawn.

Overdraw:

To write a check for an amount that exceeds the amount on deposit in the account.

Overlimit:

An open-end credit account in which the assigned dollar limit has been exceeded.

P

Payee:

The person or organization to whom a check, draft, or note is made payable.

Paying (Payor) Bank :

A bank upon which a check is drawn and that pays a check or other draft.

Payment Due Date:

The date on which a loan or installment payment is due. It is set by a financial institution. Any payment received after this date is considered late; fees and penalties can be assessed.

Payoff:

The complete repayment of a loan, including principal, interest, and any other amounts due. Payoff occurs either over the full term of the loan or through prepayments.

Payoff Statement:

A formal statement prepared when a loan payoff is contemplated. It shows the current status of the loan account, all sums due, and the daily rate of interest.

Payor:

The person or organization who pays.

Personal Identification Number (PIN):

Generally a four-character number or word, the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. The code is either randomly assigned by the bank or selected by the customer. It is intended to prevent unauthorized use of the card while accessing a financial service terminal.

Point of Sale (POS):

1) The location at which a transaction takes place. 2) Systems that allow bank customers to effect transfers of funds from their deposit accounts and other financial transactions at retail establishments.

Power of Attorney:

A written instrument which authorizes one person to act as another's agent or attorney. The power of attorney may be for a definite, specific act, or it may be general in nature. The terms of the written power of attorney may specify when it will expire. If not, the power of attorney usually expires when the person granting it dies.

Some institutions require that you use the bank's power of attorney forms. (The bank may refer to this as a Durable Power of Attorney: The principal grants specific rights to the agent.)

Previous Balance:

The cardholder's account balance as of the previous billing statement.

Principal Balance:

The outstanding balance on a loan, excluding interest and fees.

Q

R

Reconciliation:

The process of analyzing two related records and, if differences exist between them, finding the cause and bringing the two records into agreement. Example: Comparing an up-to-date check book with a monthly statement from the financial institution holding the account.

Refinancing:

A way of obtaining a better interest rate, lower monthly payments, or borrow cash on the equity in a property that has built up on a loan. A second loan is taken out to pay off the first, higher-rate loan.

Refund:

An amount paid back because of an overpayment or because of the return of an item previously sold.

Release of Lien:

To free a piece of real estate from a mortgage.

Renewal:

A form of extending an unpaid loan in which the borrower's remaining unpaid loan balance is carried over (renewed) into a new loan at the beginning of the next financing period.

Reverse Mortgage:

A reverse mortgage is a special home loan product that allows a homeowner aged 62 or older the ability to access the equity that has accumulated in their home. The home itself will be the source of repayment. The loan is underwritten based on the value of the collateral (home) and the life expectancy of the borrower. The loan must be repaid when you die, sell your home, or no longer live there as your principal residence.

Revolving Credit:

A credit agreement (typically a credit card) that allows a customer to borrow against a preapproved credit line when purchasing goods and services. The borrower is only billed for the amount that is actually borrowed plus any interest due. (Also called a charge account or open-end credit.)

Right of Offset:

Banks' legal right to seize funds that a guarantor or debtor may have on deposit to cover a loan in default. It is also known as the right of set-off.

S

Safe (or Safety) Deposit Box:

A type of safe usually located in groups inside a bank vault and rented to customers for their use in storing valuable items.

Safekeeping:

A service provided by banks where securities and valuables are protected in the vaults of the bank for customers.

Service Charge:

A charge assessed by a depository institution for processing transactions and maintaining accounts.

Signature Card:

A card signed by each depositor and customer of a bank which may be used as a means of identification. The signature card represents a contract between the bank and the depositor.

Stale-Dated Check:

Presented to the paying bank 180 days (6 months) or more after the original issue date. Banks are not required by the Uniform Commercial Code to honor stale-dated checks and can return them to the issuing bank unpaid. The maker of a check can discourage late presentment by writing the words "not good after X days" on the back of the check.

State Bank:

A bank that is organized under the laws of a State and chartered by that State to conduct the business of banking.

Statement:

A summary of all transactions that occurred over the preceding month and could be associated with a deposit account or a credit card account.

Stop Payment: An order not to pay a check that has been issued but not yet cashed. If requested soon enough, the check will not be debited from the payer's account. Most banks charge a fee for this service.

Student Loan:

Loans made, insured, or guaranteed under any program authorized by the Higher Education Act. Loan funds are used by the borrower for education purposes.

T

Terms:

The period of time and the interest rate arranged between creditor and debtor to repay a loan. 

Time Deposit:

A time deposit (also known as a term deposit) is a money deposit at a bank that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn, or it can be held for another term. The longer the term, the better the yield on the money. Generally, there are significant penalties for early withdrawal.

Trust Account:

A general term that covers all types of accounts in a trust department, such as estates, guardianships, and agencies.

Trust Administrator:

A person or institution that manages trust accounts.

U

Usury:

Charging an illegally high interest rate on a loan.

Usury Rates:

The maximum rate of interest lenders may charge borrowers.  The usury rate is generally set by State law.

V

Variable Rate:

Any interest rate or dividend that changes on a periodic basis.

W

Wire Transfer:

A transfer of funds from one point to another by wire or network such the Federal Reserve Wire Network (also known as FedWire).

X

Y

Z