Banking Terms - Loans and Debts

Banking terms important for bank exams. These terms are frequently used in Loans and debts departments :-

1. Reverse Mortgage

Reverse Mortgage also known as ‘Life time mortgage’, is a type of mortgage in which a home owner can borrow money against the value of his or her home. Thus it is a loan allowed to the sole owner of the house, and no repayment of wither the interest or the principal is required till the time the borrower is alive.

Such a loan is repaid when the borrower(s) die, or the house is sold, or the borrower no longer lives in the house as their place of primary residence.

2. Pre-sanction Appraisal

Pre-sanction Appraisal: i.e., pre-loan sanction credit appraisal, which essentially means undertaking appraising activities to ensure that the prospective borrower is credit worthy.

It is undertaken to ensure that the sanctioned loan will be performing and not turn bad/NPA.

Information like, purpose for taking the loan, work of the borrower, his income and profit, securities offered, collateral securities if any etc. among other things are appraised before the loan is sanctioned.

3. Restructured Loan

Restructured Loan Some times a new loan is made that replaces the outstanding balance (unpaid amount) on an older/earlier loan. This new loan has a longer term/ period of payment and usually comes with a lower installment amount – to make it easier for the borrower to pay the installments and to avoid the loan from becoming bad.

Loans are rescheduled or restructured to accommodate a lender who is in financial difficulty to avoid defaults in the account; thus it can also be called as re-scheduled loans.

4. Willful Default

Willful Default happens when a ‘borrower intentionally defaults in meeting payment/ repayment obligations’ – this is the proper banking language!

In other words, when a party (borrower) fails to pay installments, even though they have the capacity to pay, i.e., they have enough extra funds to pay the installment, but still does not pay – then willful default is being committed and the person is known as a willful defaulter.

Trivia: Mr. Vijay Mallya owned Kingfisher Airlines was recently declared as a ‘willful defaulter’ by United Bank of India (later other banks in the consortium followed).

5. Consortium Financing

Consortium Financing: when big companies like the erst-while Kingfisher airlines, Reliance, etc., need loans, the amount is always huge. When I say huge it means hundreds of lakhs or crores!

For one bank to be funding the whole thing could be risky and as we saw with the grounding of Kingfisher very damaging to a single bank – the bank would face closure too!

RBI does not allow any single bank to take on such huge risk by itself – thus, through ‘consortium financing’ – several participating banks come together to give the loan, each having their own risk exposure separately, which cannot exceed 15% of their capital fund.

6. Loan Syndication

Loan Syndication is like consortium finance where borrower is one but lending banks are multiple. But in syndication, the Bank with the maximum share of the loan amount is regarded as the lead bank..

A Managing Bank is appointed by the borrower and is responsible for negotiating terms of loan with the other banks willing to participate, known as the participating banks.

Where loan documentation is concerned, a ‘single common loan document’ is used for syndicated loan.

7. Infrastructure Sector Lending

Infrastructure Sector Lending lending to companies engaged in:
i. Power
ii. Telecommunications,
iii. Roads and Bridges,
iv. Railways,
v. Airports,
vi. Sea Ports,
vii. Industrial Parks,
viii. Water supply, sanitation, sewage system,
ix. Mining,
x. cold storage for storage of agricultural produce, marine products, meat etc.

8. Floating Interest Rates

Floating Interest Rates are interest rates which are susceptible to change due to change in anchor rate. Anchor rate or the bench-mark interest rate is the rate which is the underlying rate on the basis of which banks decide their floating rates.

Thus floating rates are linked to the benchmark rate; any change in the benchmark rate will affect the floating rate.

The bench mark rate could be interest rate on Govt. securities or money market rate etc.

9. Debt Recovery Tribunal

Debt Recovery Tribunal are Tribunals where banks can file suits for outstanding loans or Rs.10 lacs or more. DRT’s jurisdiction covers Bank Loans and loans of Financial Institutions

10. Asset Reconstruction Company

Asset Reconstruction Company: are companies which are engaged in the activity of financial asset reconstruction such as securitization, take over of management, sale of assets charged etc.

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  1. Hi Raman Sir, I am an avid follower of your blog. My query is with reference to IBPS Specialist Officer IV. I have completed my 4 yrs in Food Technology and had Dairy Technology as subject in few semesters. Am I eligible for Agricultural Officer Scale 1? Its not clearly mentioned that Food technologists can apply. However a candidate having a degree in Dairy Technology can apply. Please clarify this. Awaiting your response. Thanks in advance.

    1. How are you so sure?

    2. You are not eligible

      Last year one of my readers rejected for the same reason at the time of interview, so don't apply.

      You need a letter from your university stating that Dairy Farming was major.

      If your university is not providing such certificate then don't apply.

      Last year my reader had certificate from his HOD but certificate from VC was required

    3. Thank you so much for the clarification. :)

  2. Gen cut off- 80
    my score- 138, UP- oa
    pls ans 1 question whether i have a chance of final selection on 138 score or not and i m a girl so wo log ibps clerk me girls se puchte hai that aap village area me posting accept karenge ya nahi

  3. Eagerly waiting for CLERK IV digest.
    Sir from which month to which month is necessary for clerk IV .

    1. This is the first replaid my quiry.......

  4. Hello sir..I am from gujarat.. 101 marks in officer scale 1 rrb..belongs to orthopedically challenged candidate.. Is there any chances to get interview call?

  5. Chhattisgarh
    No. State/UT SC ST OBC UR Total Out of which
    1 Allahabad Bank 1 3 0 6 10 0 0 0 1 0
    2 Andhra Bank 0 0 0 1 1 0 0 0 0 0
    3 Bank of Baroda 7 20 4 32 63 1 0 1 6 3
    4 Bank of India 6 16 3 28 53 1 1 1 5 2
    5 Bank of Maharashtra 0 0 0 0 0 0 0 0 0 0
    6 Canara Bank 10 28 5 47 90 1 0 1 9 4
    7 Central Bank of India 1 1 0 2 4 0 0 0 1 0
    8 Corporation Bank 2 6 1 11 20 0 0 0 2 0
    9 Dena Bank 7 34 6 48 95 4 4 1 9 4
    10 Indian Bank 2 6 1 12 21 0 0 0 2 1
    11 Indian Overseas Bank 9 25 4 42 80 0 0 2 8 3
    12 Oriental Bank of
    Commerce 6 19 3 28 56 0 1 1 5 2
    13 Punjab National Bank 13 34 6 56 109 3 2 2 10 4
    14 Punjab & Sind Bank 1 3 1 5 10 0 0 0 1 0
    15 Syndicate Bank 1 4 0 8 13 0 0 0 2 0
    16 UCO Bank 5 14 1 20 40 0 0 1 3 1
    17 Union Bank of India 3 9 1 13 26 1 1 1 3 1
    18 United Bank of India 0 0 0 0 0 0 0 0 0 0
    19 Vijaya Bank 1 2 0 3 6 0 0 0 1 0
    TOTAL:::: 75 224 36 362 (697) 11 9 11 68 25
    this means total 697 vacancies in first list shown but total allotment made by ibps to all catogeries are 576 already 121 seats are not alloted by ibps and 10 % reserved list is created by ibps.It think candidates are fool go and see your state allotment everyone who want job (whether they are in reserve list or not )and also other candidates who are appearing in clerk 4.)

    1. No body can understand this bla bla bla......

  6. sir plz suggest me....
    in descriptive paper , the question of reading comprehension. can be answered directly from the passage is correct way or we can answer it in our words is much better ?

  7. sir please provide the list of states and their festival(official)


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