Banking terms you need to know for daily use

We Indians are getting digitally savvy, shopping to donation, mails to good wishes everything is done on digital platform.

Our financial habits are also getting the flavour of digital evolution.  We do bankiBanking, investing, transaction with some taps and swipes.
So, I thought of dedicating this post for some terms we often come across specially using banking services.

MICR Code – Magnetic ink character recognition codeThe MICR encoding, called the MICR line, is at the bottom of cheques and other vouchers and typically includes the document-type indicator, bank codebank account number, cheque number, cheque amount, and a control indicator. The technology allows MICR readers to scan and read the information directly into a data-collection device. 


NEFT – NEFT is a facility enabling bank customers in India to transfer funds between any two NEFT-enabled bank accounts on a one-to-one basis. It is done via electronic messages. NEFT settles fund transfers in hourly batches (now 30 minutes batches)with 12 (Now 23 settlements)settlements occurring between 8:00 AM and 7:00 PM on week days. 

RTGS – Real-time gross settlement are specialist funds transfer systems where the transfer of money or securities takes place from one bank to another on a “real time” and on a “gross” basis. RTGS systems are typically used for high-value transactions that require and receive immediate clearing. 

CVV – CVV is an anti-fraud security feature to help verify that you are in possession of your credit card. For Visa/Mastercard, the three-digit CVVnumber is printed on the signature panel on the back of the card immediately after the card’s account number.

IFSCThe Indian Financial System Code (IFS Code or IFSC) is an alphanumeric code that facilitates electronic funds transfer in India. A code uniquely identifies each bank branch participating in the two main Payment and settlement systems in India: the Real Time Gross Settlement (RTGS) and the National Electronic Fund Transfer (NEFT) systems.

mPin – The full form of MPIN is ‘Mobile banking Personal Identification number’. It works as a password when you perform any transaction using mobile. It is a 4 digit (6 digits in some banks) secret code similar to the ATM PIN.

UPI – Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. 

ECS – Electronic Clearance Service (ECS) scheme provides an alternative method of effecting bulk payment transactions like periodic (monthly/ quarterly/ half-yearly/ yearly) payments of interest/ salary/ pension/ commission/ dividend/ refund by Banks/Companies /Corporations /Government Departments. The transactions under this scheme move from a single User source (i.e. Banks/Companies /Corporations /Government Departments) to a large number of Destination Account Holders (Customers/Investors). This scheme obviates the need for issuing and handling paper instruments and thereby facilitates improved customer service by the Banks and Companies/Corporations/Government Departments effecting bulk payments.

Standing instruction – Standing instructions are a way of making an automatic payment of a fixed amount to a loan, bill, or credit card at the same time every week or month. It can be made from your savings or checking account and is most commonly used to make payments to a mortgage, car loan, or to pay bills


Source – Wikipedia, indiapost

5 ways they sell you wrong financial products

#Mis-selling is rampant in financial services and it spares none! Beaware and take decisions rationally. Here in this post we would focus on how they sell you wrong financial products and how can you fight it.
Financial literacy is important. Even more important is to know how to manage own finance. Be it loan, insurance, stocks, or simple savings account in banks, on a regular basis we need to deal with some decision making with our finances which defines our financial habits and saving behaviour. Many people are averse to discussing this important aspect “money” as they dislike numbers, or even hate to keep a check untill a major decision needs to be taken like tax saving, taking housing loan, or god forbid some medical emergency. The sales representatives of various forms like advisors, brokers or plain simple sales executives of the financial industry mints money during these emergencies without providing the right guidance for which they are paid for. Not only the less educated people, even financially aware people fall in the trap lured by bonus, rewards and false promises. Let us look at what are the common methods are used for misselling the products. Surprisingly in many cases the buyer is partially aware that product is not right for them. Let us look at 5 common ways of getting conned.

1. Buy an insurance to open new bank account – without taking the name, this is a common feature in India’s largest public sector bank. Public sector bank account pass book is often used as a address proof. So, when somebody especially new in the city tries to open an account in the branch of this Bank, he/she is politely directed to the branch manager, where the applicant is almost forced to buy a life/health insurance in exchange of a savings account. It has been a personal experience in large city as well as smaller towns. Besides account opening this method is openly encouraged by seniors in the system for any work/favor a customer asks for (within the scope of banking services )
2. Hiding the hidden charges – This is also common, cold callers luring potential customers with half information. It is seen that despite probing multiple times, the executives dont give out details. And, the customer only comes to know once he start using the product, hence, trapped for short time or for ever. It is common for life insurance and credit cards.
3. Emotional black mailing by family and friends – Rampant in life insurance industry, driven by incentive model, the large number work force is part-time advisors, highly crowded by house-wives, retired professionals or somebody looking for an extra income. They often sell highly incentivised product for quick buck without bothering about the need of the person. Being family or friends, buyers often give-in to save the relationship or motivate them. This emotional buying cost them dearly. They mostly don’t even go back and complain even unsatisfied. 
4. The vanish act – Selling a product takes the seller closer to his target. Spilling the beans about the risks involved or fee structure can take them one step back and a 10 pitches back. To avoid the hassle, they simply sell the product to never return to service their customer. 
5. Not explaining the complex products – They are in a hurry or simply they don’t understand the product. Often, they sell complex products like ULIP plans, endowment plans even pension plans without taking out time to explain the details unless asked for.
Take accountability 

Though regulatory bodies like SEBI, IRDA doing their bit, it is important for every individual to basic research on the product you are buying. The basic Google search on the product can throw up a lot of information on the product. The aggregator sites on insurance, loans, deposits can further help with additional information and best rates. 
Ask the broker for written guidelines on product usage and costs involved , especially on insurance and credit cards. Do read the terms and conditions, however pathetically time consuming it may feel. It is your duty to do double check as much as it is the with the sellers. And don’t buy the product if you find discrepancy in what the seller said and mentioned in the written document.
If any official/broker/advisor sell you wrong products, do reach out to consumer grievance cell.
Beware. Take charge!

Financial Inclusion – A Mission and A Revolution!



The term ‘financial inclusion’ reminds me of the first ethos of democracy that is ‘equality’, equal treatment, equal opportunity and equal availability of resources. It simply means providing financial services at a minimum cost to sections of underprivileged and low-income segments of society, making all individual contributing to the economic growth.

If we go by research reports, India stood in the bottom few countries in financial inclusion until 2011, which caused financial disparity and uneven growth, a major setback for the developing nation. However, the recent multi-layered approach towards financial inclusion indicates a strong step towards eliminating this socio-economic hindrance. According to World Bank data, around 2 billion people in the world don’t use or have access to formal financial service and about 50% of the poorest households are unbanked. The experts believe, the inclusion of these unbanked population would reduce the economic inequality, World Bank aims to complete Universal Financial Access (UFA) by 2020.

The India Scene: Though the term was coined in the year 1994, the history of financial inclusion goes back to the pre-independence era of the first foundation of the modern banks. As time rolled, India, a new democracy did its own bit to include the poor and deprived population to include in the financial system. However, the history of banking in India had its image deep-rooted in Indians as ‘for rich and wealthy’, which restrained the poverty-stricken less privileged to knock the door of banks. They kept relying on unorganised money-lenders who preyed on the poor. Few major steps in this era included nationalising the banks between 1969-1980. It was only the first step towards a long marathon. This era also built the foundation of RRBs (Regional Rural Banks), formed to serve the large unbanked population of rural areas and promoting financial inclusion. 

The year 1991 marked the new wave of liberalisation reforms in trade and economic policies in India, which also brought the private banks into existence. The process of opening branches in rural India, however, remained slow. 

Real Growth: For long, banks ignored the remote and rural areas of India to focus on their profit and keeping their costs in check. RBI played a catalyst in the modern reform by permitting banks to engage business facilitators (BFs) and BCs as intermediaries for providing financial and banking services, also known as Bank Mitra. To further penetrate rural India, RBI simplified branch authorisation in December 2009, allowing domestic scheduled commercial banks to freely open branches in tier III to tier VI towns and villages with a population of less than 50,000 under general permission.

In the last decade, India has witnessed a paradigm shift in the approach of financial inclusion, from a social responsibility it has turned into a full-fledged ‘mission’. The true essence of financial inclusion is reflected in the series of initiatives under the leadership of PM Narendra Modi. Keeping up with the demand of millennial generation and new economic environment, financial inclusion is now not limited to opening bank branches in rural areas and frill-free bank accounts. There have been multiple action parallely undertaken like a revolution to reach the goal. Besides direct approach, the government also facilitating other institutions in their efforts and keeping up with the need of modern financial reforms. 

Year 2011 onwards
The series of new initiatives are compelling the unbanked population to open a bank account and link it to Aadhaar and PAN to receive government subsidies and other assistance. It is not a one-time approach, but the persistent effort can be seen through action at multiple levels attacking the root cause.

During the period 2011 – 2015, the unbanked population of India halved from 57.7 crores to 23.3 crores, as reported in a PwC research. PradhanMantri Jan DhanYojna (PMJDY) and demonisation drive together mobilised about 26 crores of unbanked population to the formal financial ambit further lowering the number.

With PMGDY, the government also introduced term insurance policy for all, Pradhan MantriJeevan Jyoti Yojana (Rs. Two lakh sum assured for An annual premium of Rs. 330) and health insurance scheme Pradhan Mantri Suraksha Bima Yojana (Rs. Two lakh sum insured for a premium of Rs. 12). The Adhaar linked accounts now can also be used for UPI with a smart phone or even feature phones (mobile wallet). To encourage the unbanked population, the consistent efforts are made through the demonetisation drive, direct subsidies and now monetary assistance for pregnant women in the underserved population amongst other. The regulations in microfinance business over last decade have made financial services affordable for the poor. The introduction of payment banks and small banks only ensures a better reach to the rural and remote areas without proper infrastructure facility.

A recent research report by BCG mentioned India to be making the fastest progress in the financial inclusion drive. Including digital mode of banking in the base level is expected to further strengthen the movement as the number of mobile users exceeds the bank account holders with a high margin. Given the infrastructure and resource constraints, digitisation drive will make rural banking viable and efficient.

Communication: The recent moves of PMJDY account and demonetisation was well covered by all media outlets and PM intelligently used media for the benefit of the nation especially with his ‘Mann ki Baat’ on radio and announcements on national TV Doordarshan. Going further, communication will play an important role. Experts will agree, India, the country with the world’s second largest population is known for its diverse culture and socio-economic system. As the focus is to reach the rural and remote areas and include them in the financial system, the communication tool and strategy need to merge with the local flavour while keeping the key message intact. The localisation of communication strategy efforts will further improve the trust of the rural to only open but transact and maintain their bank accounts for their own benefits.

If we think logically, the common mass media used for the tier-I cities would be quite irrelevant for the tier-II and below, however widely it can report the issue. For an effective communication programme, three major aspects would be: 1. Targeting right Influencer group 2.Choosing the right platform/ tool and 3. Designing the key message.

Choosing the right Influencer group will be as important as the messaging. The village communities are largely influenced by their Panchayat, school going or educated children, teachers, doctors, postmen and local heroes. The benefits of bank account and choosing formal financial products can be promoted in platforms like local events through plays, sponsorship programs of self-help groups, training children in the government schools, training volunteers to spread the message in the community etc. Sharing a digital demo should be an important element of the campaign. The content of the messaging should be touching the right cords of the rural population.
An informed society makes a better decision. So, educating them in the right direction is also a core responsibility of powers that be, apart from providing mere services. 

Different kinds of lesser known bonds with interesting names

Before I resume to my usual dopes on personal finance, I thought today we will discuss something interesing and informative.  and stumbled upon an article which talks about some srikingly different names of bonds, very unusual of  such a strict financial instrument.

Till recently I thought it’s only the phone makers who were obsessed with food or fruits who named their products as “Apple”, “Marshmellow”, blackberry and so on until I came across ‘Masala Bonds’. But hold on, there are a host of it. On a newspaper, I found names like ‘Panda’, ‘Samurai’ and ‘Kiwi’ used for different bonds. I wished to dig further and present to you the list of such lesser known bonds from across the world with different names. 
These interesting bond names are popular in many countries – India, UK, China, Japan, etc. The common factor in these bonds is their features offering. These bonds are mostly used by either foreign country corporates or bonds are sold in foreign country denominations, however with some exceptions like ‘Kiwi’. The bond names amazingly express the love for food amongst the financial community across the globe (on a lighter note). Few names are also attributed to other important symbols of the nations. The cuisine or symbol reflects the connection with the country. And my obsession with financial market and personal finance both grows stronger J
Here I present to you the compiled list, sourced from Wikipedia, newspapers and my own memory. You may not require this list for investment purpose but can serve as informative and interesting read. I would like to go with chronology – 
Arirang Bond  –  Arirang is Korean folk song, used for a won-denominated bond issued by a foreign entity in South Korea. It is a very small segment of their bond market, the Asian Development Bank issued it in 1995.

Baklava bond – Name is taken from a Turkish dessert, Baklava is a bond denominated in Turkish Lira and issued by a domestic or foreign entity in Turkey. Turkish government allowed companies to issue these bonds in the year 2010.

Bulldog bonds – Taken from the national symbol of united Kingdom, Bulldog bonds are sterling-pound based bonds (the third largest reserve currency in the world) issued by non-British institutions that want to sell the bond in the United Kingdom.

Dim sum bond – A popular appetiser even in Indian Chinese restaurants, these are bonds issued outside of China but denominated in Chinese renminbi, rather than the local currency listed in Hong-kong, not in mainland china. 

Formosa bond – Formosa, is an alternative name for the island of Taiwan. These bonds issued in Taiwan but denominated in a currency other than the New Taiwan Dollar.

Huaso bond,- Derived from the term referring to Chilean cowboys, a Chilean peso-denominated bond issued by a non-Chilean entity in the Chilean market.

Kangaroo Bond – The name deriving Kangaroo, a national animal from Australia, is the type of bond issued by foreign entities, traded in the Australian market, is denominated in Australian currency, is subject to Australian laws and regulations.

Kimchi Bond – kimchi, name derived from a Korean side dish, is a non-won-denominated bond issued in the South Korean market.

Kiwi Bonds – Derived from the famous fruit from New Zealand, Kiwi bonds are bonds offered directly to the public and available only to New Zealand resident investors, redeemable on maturity or at the option of the bondholder and are issued in 6 months, 1 year or 2 years 
period.

Lion city bonds – The name derived from the national symbol of lion head, Lion City bond foreign currency denominated bond issued by foreign company in Singapore

Maple bond – I just love the maple syrup over a hot pancake on breakfast. However, we are here talking about the Canadian dollar-denominated bond issued by a foreign entity in the Canadian market.

Masala bonds – Derived from the Hindi word for spices, these are rupee-denominated bonds 
issued outside India.

Matrioshka Bonds – Name derived from the famous Russian dolls, these bonds are referred the Rubble denominated bonds, issued by foreign entities for reaching Russian investors.  

Panda Bond – A Panda bond is a Chinese renminbi-denominated bond from a non-Chinese issuer, sold in the People’s Republic of China.

Samurai Bond – a term referred for military nobility from Japan of medieval and early-modern Japan, a samurai bond is a yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.

Shibosai Bond – yen-denominated bond sold directly by issuing company, a bond denominated in yen sold directly to investors by the foreign issuing company.

Shogun Bonds – The term ‘Shogun’ is used for Japan’s supreme military leaders from 1603-1869. It is used for the non-yen-denominated bond issued in Japan by a foreign institution or government.

Yankee Bonds – The word is derogatory a term used to describe Americans by the Brits, Canadians, Australians and the like. A Yankee bond is a bond issued by a foreign entity, such as a bank or company, but is issued and traded in the United States and denominated in U.S. dollars. 

Uridashi Bonds – A Japanese word for ‘Sale’, Uridashi Bonds are the secondary offering of bonds, denominated in Yen or issued in a foreign currency. These bonds are sold to Japanese local/ individual investors

Hope it made an interesting read. will soon be back with my new post. Till then.. enjoy! A very happy weekend to all of you 🙂 see you soon

Money goes digital – how do I do online transactions

Online transactions are easy, safe and convinient. There is no tension of getting theft or losing money in the crowded market place or in a hospital. It is accepted every established shops, cinema hall, jewellery shops, hospitals even can services.

It wasn’t any different day for Rajiv, he woke up, looked at his mobile, checked the news app, freshenup, got ready and booked an UBER cab, today he had got Paytm offer, so paid by it. He got down right at the office door, he found many people gathered in groups discussing #demonitisation. Though he wanted to share his views too, but he was running late and wanted to have breakfast at office cafeteria, he had a full plate chole nature and paid by his preloaded card and entered his desk. His work was going smooth with occasional interruption with the demonitisation of currency, suddenly a reminder popped up! it was his fiance’s birthday and he had forgotten it. An idea struck his mind, he checked and found an online offer on cake and bouqet, he paid through credit card and ensured a delivery to her office within 1 hour making it a real big surprise for bday!
Day passed by and he managed very well with cards, net banking,credit cards, pre paid card hardly disturbing his daily routine.

But this is not the case with all of us. It’s high time we understand the benefit digitisation of money and ease of using it. 
How do we get at ease with digital transactions
There are atleast 6 broad category available to make most of your money digitally.
1. Net banking – Most of the time it is sheer inertia or misconceptions to create a net banking account attached to your existing savings account more than fear of online money theft. This has become all the more convenient with the launch mobile applications in the same. One can use it for checking balance, create fixed deposits, recurring deposits, transfering money to other accounts, pay utility bills, credit card bills, buy mutual funds, insurance and even apply for #IPO. For transactions, one can opt for #NEFT #RTGS #IMPS options available in the website itself. These secured transactions with password and security check through mobile varification.
Debit card – This is the oldest form of plastic money. Very common yet less used in transactions other than withdrawing money from ATM. With the ATM PIN, one can use it for online transactions as well as at merchant counters i.e. shopping, dining, movie tickets everything. 
Credit card –This mode exist as long as debit cards, but this is a tricky one. This is not your money, this is a short term loan which attracts very high interest on non payment in he stipulated time. This is a good mode if one uses responsibly. 
Online wallets 
This segment is picking up in India. This wallets can be loaded with money using netbanking and can de used in small amounts.The best part about the online wallet is transaction gateways are not exposed to the bank accounts, hence safer. These are like actual wallets and money can be transfered to anyone with the same online wallet. #Paytm #MPesa are some example of e-wallets. There are some charges attached when you transfer the wallet money to your own account.
UPI – It is government’s answer to e-wallet.It is an interface through which account holder of one bank can transfer/receive money to someone having account in same/different bank through smartphone. Multiple bank accounts can be linked to a single cell phone. The transaction takes place through virtual address hence, no requirenent of bank details There would be no need to enter bank details.Transaction can be authorised by entering either Aadhar card number or mobile phone number. It can be used for shopping, Bill payments etc.

Prepaid cards – It is nothing but your own money loaded in the card, can be used like a debit card, howeve unlike your debit card it is not attached to your savings account

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